I'm Buying or Selling a Home, What Happens to My Property Taxes?

You’ve just bought your Chicagoland dream home. You’ve got the right number of bedrooms, the perfect parking setup, you’re walking distance to public transportation, and all of the negotiations went off without a hitch.

Now comes the fun part – getting a handle on your property taxes.

For first time homeowners, taking responsibility for your property taxes can be one of the biggest transitions from renting. And while the property tax process can be a little convoluted and daunting, there’s no reason to fear – Real Group is here!

Buying or selling a home in Cook County, Illinois? Curious about what’s going to happen to your property taxes because of the sale? Here are the broad strokes of what you need to know:

How Do I Pay Property Taxes In Cook County?

In Cook County, homeowners pay their property taxes "in arrears,” which means that you are responsible for paying the tax that accrued on your property during the previous calendar year. (So, for instance, in 2017, you will pay 2016’s taxes; in 2018, you’re paying for 2017, and so on.)

It’s also important to note that Cook County homeowners receive their property tax bill in two installments each year.

The due date for the first installment is always (intended to be) the first business day in March, and the taxes owed are generally 55% of the prior year's total tax. The due date for the second installment may vary, because it is dependent on the delivery of data from a variety of state and country agencies. In any case, you can expect this second installment in late summer/early fall; it will reflect new assessed values, assessment appeals, exemptions, state equalization factor, and taxing-district tax rates.

For 2017 taxes, you should expect to see your first bill come in the spring of 2018, with a due date of March 1. The second bill will follow, with a due date likely in August or September (in 2017, for reference, the due date for the Tax Year 2016 second installment was Tuesday, August 1).

What Types of Exemptions Are Available?

There are a few common exemptions applied to the amount of your tax assessment. The most important to know about are:

  • Homeowner’s Exemption: If you reside in the home full time, or use it as your primary residence, you're entitled to a small discount; the Cook County Treasurer’s Office suggests that homeowners who take advantage of this exemption can save “$250 to $2,000 per year”
  • Senior Citizen Assessment Freeze: If you're over the age of 65, you can apply for a freeze of the assessed value of their property – meaning that your taxes may only increase a small amount each year (or even decrease), even as surrounding properties continue to rise in assessed value

There are a few other exemptions available to qualified homeowners, as well, including the home improvement exemption; there are also exemptions specifically created for military personnel, disabled peoples and veterans, and longtime homeowners.

To learn more about the types of exemptions available, take a look at forms, and see if you qualify, we encourage you to visit the websites for the Cook County Treasurer’s Office and the Cook County Assessor’s Office.

What Happens When a Property Changes Hands?

When you buy or sell a property in Chicago or elsewhere in Cook County, who is responsible for the annual property taxes? Does the timing of the sale matter? How do payments change hands?

Here are a few things to remember about property tax and home sales in Cook County…

Above all, it’s key to remember that tax liability conveys with property. What this means is that, if Jason owns a home and he sells it to Meegan on Dec 30, then Meegan gets the tax bill for this year - even though she only owned the property for one day.

Should a sale like this happen, though, the seller isn’t just going to hang the buyer out to dry. Instead, at the closing table, Jason must contribute or credit Meegan with the estimated 2017 taxes, minus one day (364/365 times the tax proration). The purchase contract will dictate if the seller is prorating the taxes at, for example, 100%, 105%, or 110% of the last ascertainable tax bill. Sometimes this proration is set during the contract negotiation itself, other times it is left "TBD" to be agreed upon during the attorney review period

Conversely, if Jason were to sell Meegan the house on February 15, 2018 – before having received the 2017 tax bill - he would owe her the prorated tax credit estimate for ALL of 2017, and for the first 46 days of 2018. Effectively, the seller would be crediting the buyer with 13.5 months of estimated taxes.

While the method described above is the most common approach, some parties have been known to handle this transaction differently.

For instance, sometimes a credit is made, and the contract calls for a "True Up" when both tax bills for the prior year have arrived. In this case, there's typically money held in an escrow account. If, after the bills arrive, it is determined that the seller has underpaid, some or all of the escrow funds will go to the buyer. If the taxes end up being less than what has been contributed (which is rare), the funds may be credited back to the seller.

While this does happen, it should be noted that this whole arrangement is uncommon.

Finally, buyers and sellers should bear in mind that exemptions (i.e., Homeowner’s, Senior Citizen) are always applied to the full year. That is to say that, if a homeowner has the exemption for 2018, and moves in February of the same, the discount should remain for the full tax year. The new owners will need to re-apply for 2019.

Have any more questions? Looking for help buying or selling your Chicagoland property and not quite sure where to start? The Real Group team is here to help! Drop us a line today to get the process started; if we can’t help you personally, we’d be happy to refer you to the right professional who can!

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Chicago, IL 60614

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