As part of the fiscal 2020 budget negotiations, the Kenney administration and City Council have agreed to increase the property-tax homestead exemption to $45,000, which would shave an additional $70 off a homeowner’s tax bill.
The current exemption is $40,000, and Council members wanted to increase it to $50,000. On Thursday, they agreed to move a bill for final passage that would raise it to $45,000.
The homestead exemption allows residential property owners, who use the home as a primary residence, to deduct the designated amount from their property assessment to determine the tax bill.
With a $45,000 exemption, the owner of a home valued at $100,000 would pay taxes on $55,000 of that value, yielding an annual bill of $770, as opposed to $1,400 on the full amount. With a $40,000 exemption, the bill would be about $840.
Because property tax revenues are split between the city and the School District, the increase in the exemption would have resulted in a $6.5 million loss for the city and $8.5 million loss for the School District. But officials negotiated to have the city absorb the entire $15 million loss, by adding an extra $8.5 million to the city’s allocation to the School District for fiscal year 2020.
“This gives increased relief to residential property owners who are affected by rising values, while at the same time ensuring that the School District’s own finances are not affected,” said city spokesperson Mike Dunn.
Last year, the administration proposed increasing the homestead exemption from $30,000 to $45,000. Ultimately Council approved an increase to $40,000 for fiscal year 2019. That increase, however, was said to be revenue-neutral because of an increase in the real estate transfer tax.
Council looked to increase the homestead break again this year as a way to help residents struggling with increased assessments and property taxes. The 17-member body has been raising questions about the accuracy of the Office of Property Assessment’s methods in revaluing hundreds of thousands of properties. The city’s new assessments led to property tax increases for many.