A Homeowner's Tax Bill
Here's a typical property tax bill, for a homeowner in Tippecanoe County, Indiana, with its property and personal identity information removed. Most property tax bills in Indiana look like this, though counties can adopt any format approved by the State Board of Accounts. You can take a look at this bill, and click on any part of it to read an explanation. Or, scroll down to find an explanation of any section of the bill.
Assessment Year/Payable Year
Property tax bills are labeled with two years. This is because property is assessed in one year for taxes payable in the next. For example, if a property is assessed on March 1, 2004, the taxes on the property will be due in May and November, 2005. This is similar to the income tax--the taxes you pay by April 15 are on the income earned the year before. The first year listed on the tax bill is the assessment year. The second "pay year" or "payable year" is the year in which the taxes are due.
We often label assessment years with a phrase like "2004 pay 2005" to show the year the property was assessed, and the year the taxes were paid. The last reassessment, for example, occurred in 2002 pay 2003. That means the new market value assessment rules were applied in 2002 and taxes were collected based on these new assessments in 2003 (though it took many counties longer than that).
Property Identification and Taxing District
The key number is the principle identification code that this county uses for this property. The key number also shows up on the assessment record and the assessment notice. It could be useful if you have questions for the assessor, who might ask you for this number to help answer your questions.
In Tippecanoe County, the first three digits of the key number identify the "tax district" where the property is located. The tax district is also identified by name on the tax bill. The name is "West Lafayette WLCS B-C LIB." It means that the property is located in: Tippecanoe County, Wabash Township, West Lafayette City, West Lafayette Community School Corporation, Tippecanoe County Library District, and the Greater Lafayette Transportation District.
A tax district is an area within a county where a set of local government units overlap. Each of these units charge property taxes, so the rate that this taxpayer pays on this house is the sum of all the tax rates of all the overlapping units. Every property in the tax district will be charged that rate. Rates will be different in other tax districts. For example, much of the City of West Lafayette is in the West Lafayette Library District. This unit has a different tax rate than the county library district, so the total tax rate charged in that district will be slightly different from the rate charged in this one.
The tax bill also shows the legal description of the property. This house is in the University Farm subdivision, phase one, lot 78.
Distribution of Gross Tax
The tax bill emphasizes the fact that you pay taxes to many overlapping governments by showing the distribution of gross tax payments. This is "for your information." It is not used in the calculation of your tax bill.
You'll notice that in total these governments are receiving a lot more than you pay. That's why it's called the distribution of the gross tax. The gross tax is the sum of the net tax that you pay, and the property tax credits that the state pays (see below). You pay the net tax, after state credits are subtracted. The local governments receive your tax payment, and the revenue that the state pays out to make up for the money you don't pay because of these credits. Some counties show the net tax distribution.
Some counties will show the percentages of your tax bill that each government receives, rather than the dollar amount. Some counties will even print a pie chart to show the shares. Here's what the pie chart would look like for this tax bill:
The school corporation receives by far the largest share of this tax payment. That will be true for most taxpayers in Indiana. Statewide, school corporations receive about half of all property tax collections. In some rural areas, school receive more than two-thirds of the revenue. The county and the city or town (if there is one) get the next biggest amounts. On this bill there is a separate listing for "welfare," which is a county function, though the tax amounts are determined by the state.
Statewide, schools corporations, counties and cities/towns receive over 90% of property tax collections. That's certainly true on this tax bill--the school, city, and county (including welfare) get 97% of the tax payment. The other local governments receive a very small share. And the state government gets a little. The state tacks on a fraction of a cent per $100 assessed value to each tax bill. That adds up to about $9 million for the state each year. Local governments receive about $7 billion in gross taxes. The property tax is primarily a local tax.
Tax Increment Finance (TIF)
This house is not in a tax increment finance district (and it wouldn't matter if it was). TIF is a way that many county and city/town governments help pay for new infrastructure. It works like this.
The "TIFing" government (always a county or city or town) will draw a boundary around an area where it thinks development will take place. Development means changes in land use or new construction. Taxes on property that is assessed at the time the TIF district is created continue to be distributed to all the overlapping units--including the school corporation, the township, the library district and any other special districts. But taxes on commercial property (like stores or office buildings) that is newly built after the TIF district is created are distributed only to the TIFing government. If the city creates the TIF district, all the additional tax revenue on new construction will go to the city.
The city or county uses this revenue to pay for infrastructure, usually (but not always) facilities that are related to the development in the TIF district. A new factory might require new road construction and a bigger sewage treatment plant, for example. The revenue from the TIF district could be used to pay for this new infrastructure. The intent of TIF, then, is to make development pay for itself.
The tax bill on a commercial structure in a TIF district, built since the TIF district was created, will show a different gross tax distribution. Some small amount would still go to all the overlapping units, since the land would have been assessed prior to the TIF district's creation. But the taxes on the structure and on the increased value of the land would go to the county, city or town that created the TIF district.
This is a tax bill for a house, though. New houses are not included as part of "TIFed" property, so taxes on houses are distributed to all the overlapping governments even when they are in TIF districts.
Gross Assessed Value of Land and Improvements
Assessed value is the dollar value assigned to your property by the local assessor. It is "gross" assessed value because it does not include the exemptions and deductions that most property is eligible for. That means that for most taxpayers, not all of their property's assessed value is taxed. "Net" assessed value is gross assessed value less deductions and exemptions.
Assessed value is divided into land and improvements (buildings, structures). Each is labeled "R" or "NR", which stands for "residential" and "non-residential." Assessed value must be separated into residential and non-residential categories for the homestead credit (see below). This is a percentage reduction of property taxes on residential property only. Non-residential property is not eligible.
All the property here is residential. The sum of the land and improvement values is $183,700. This is the figure calculated on the assessment record, and included on the assessment notice. In Indiana since 2002, the total gross assessment is a prediction of the selling price of the property.