Buying a Home? Don't Assume the Current Property Tax Bill Will Be Your Property Tax Bill

You've found a home you love.

The price works. You've calculated the mortgage payment. You've looked at the property taxes on the listing and everything seems to fit comfortably within your monthly budget.

Then, sometime after you buy the home, the property tax bill changes—and your monthly escrow payment goes up with it.

For some homeowners, the difference can be significant.

That's why buyers should understand something important before purchasing a home in Illinois:

The seller's current property tax bill tells you what the property is being taxed at today. It doesn't guarantee what you'll pay in the future.

Why Can the Current Tax Bill Be Misleading?

Imagine you're purchasing a home from someone who has owned it for 20 or 30 years.

Maybe they purchased the property for $200,000 and you're now buying it for $450,000.

You see the existing property tax bill and naturally use it when estimating your future housing expenses.

But a lot may have changed since that owner purchased the property.

Property values in the neighborhood may have increased substantially. The property's assessed value may change during a future reassessment. Tax rates and local levies can change. The seller may also receive exemptions that won't necessarily apply to you.

The important takeaway is that a historical tax bill is not a promise of future taxes.

Does the Assessor Automatically Reset the Home's Value to Your Purchase Price?

Not necessarily.

This is an important misconception.

In Cook County, for example, the Assessor doesn't simply take the price you paid for a home and automatically make that its assessed market value.

Residential property values are estimated using property characteristics and market data, including sales of comparable homes. Cook County also generally reassesses areas on a three-year cycle.

A recent arms-length sale can provide useful evidence of what a property is worth, but your purchase price and the Assessor's estimated market value aren't required to be identical.

So the concern isn't simply:

"I paid twice what the previous owner paid, so my taxes will double."

Property taxes don't work that simply.

The better question is:

"Is the current tax bill a reasonable indication of what this property could cost me going forward?"

The Seller's Exemptions May Not Be Your Exemptions

This is another detail buyers can easily overlook.

The current owner's tax bill may reflect exemptions for which they qualify.

Depending on the owner and property, exemptions can reduce the taxable value used in calculating the bill.

When ownership changes, you shouldn't simply assume every exemption appearing on the seller's tax history will continue unchanged for you.

Instead, determine which exemptions are currently applied and investigate which exemptions you may qualify for after purchasing the property.

This can be particularly important when buying from a longtime owner.

Reassessments Can Affect the Numbers

Illinois property assessments can change over time.

In Cook County, properties generally follow a triennial reassessment cycle, with different portions of the county reassessed in different years.

When a property is reassessed, the Assessor develops an updated estimate of its fair market value based on market information and property characteristics.

That means the timing of your purchase relative to the area's reassessment cycle can matter when you're thinking about future taxes.

An assessment increase also doesn't necessarily translate dollar-for-dollar into the same percentage increase in the tax bill. Property taxes involve additional factors, including tax rates, levies and applicable exemptions.

The system is more complicated than:

Home value went up 20% = property taxes go up 20%.

Why This Matters to Your Mortgage Payment

If you have a mortgage with an escrow account, your lender may collect money each month for property taxes and homeowners insurance.

Your monthly mortgage payment might therefore include:

Principal + Interest + Property Taxes + Insurance

If the property tax obligation increases, your lender may eventually adjust the amount collected for escrow.

That's when a buyer who thought they had a comfortable monthly payment can suddenly feel the difference.

The mortgage principal and interest may not have changed at all.

The escrow portion did.

And if the escrow account doesn't have enough money to cover a larger-than-anticipated tax bill, the lender may also need to address an escrow shortage.

Don't Qualify Yourself Based Only on Today's Tax Bill

Suppose you're comparing two homes.

One has a current tax bill of $6,000.

Another has a current tax bill of $9,000.

It would be easy to assume the first property will always cost $3,000 less per year in property taxes.

But before making that conclusion, look deeper.

How does each property's assessed value compare with its apparent current market value?

When was the area last reassessed?

What exemptions are currently being applied?

How do the properties compare with similar homes nearby?

Is there anything unusual about the tax history?

You may still determine that the first home has substantially lower taxes.

The point is to verify rather than assume.

Look at the Property Tax History

When you're seriously considering a home, don't look at only the most recent tax bill.

Look at the history.

Has the bill been relatively stable?

Did it recently increase or decrease?

Did the assessed value change?

Which exemptions are being applied?

Does anything look unusually low compared with similar properties?

A single number tells you what was billed for one tax year.

The history gives you context.

Compare Similar Properties

This can also be useful when something doesn't seem right.

If the house you're considering has dramatically lower taxes than several similar nearby homes, don't automatically celebrate.

Ask why.

There may be a perfectly reasonable explanation.

But unusually low taxes can also be a reason to investigate the property's assessment and exemptions more closely rather than building your long-term budget around that number.

Your Purchase Price Still Provides Useful Information

Even though the assessor doesn't necessarily reset the assessment to your exact purchase price, the amount you're willing to pay for the property is still useful when thinking about your finances.

If you're purchasing a home for $500,000 that has an assessed market value substantially below that amount, it's reasonable to investigate why the difference exists and what could happen during future assessment cycles.

That doesn't mean you should predict a specific future tax bill.

It means you should recognize the uncertainty and leave room in your budget for taxes to change.

Can You Appeal an Assessment?

Property owners generally have opportunities to challenge assessments when they believe there is a valid basis to do so.

Depending on the circumstances, arguments may involve the property's market value, uniformity compared with similar properties or incorrect property information.

There are deadlines and procedures involved, and purchasing a property doesn't guarantee that an appeal will result in a reduction.

The important thing for buyers is to know that assessment notices shouldn't simply be thrown into a drawer.

Review them when they arrive and understand the applicable appeal deadlines.

How Should Buyers Budget?

You can't know with certainty what your property taxes will be five years from now.

But you can avoid treating today's bill as though it will never change.

Before purchasing:

Review the property's tax history.

Look at the assessed value, not just the tax bill.

Review the exemptions currently applied.

Compare the property with similar nearby homes.

Understand the local reassessment cycle.

Ask questions when the existing taxes appear unusually low.

And most importantly:

Don't stretch your monthly budget so tightly that a future increase in taxes makes the home unaffordable.

Think Beyond the First Mortgage Payment

When deciding whether you can comfortably afford a home, don't focus only on the payment shown on today's mortgage estimate.

Property taxes can change.

Insurance premiums can change.

Association assessments can change.

Maintenance and repairs happen.

Homeownership requires some room in the budget for expenses that won't remain exactly the same year after year.

At AED Realty, we help buyers look beyond the listing price and understand the bigger financial picture surrounding a home purchase.

Explore our Buyer Resources, read How Much Does It Cost to Buy a Home in Illinois?, learn about Illinois Closing Costs for Buyers, or contact AED Realty to start building a homebuying plan.

Clarity. Strategy. Execution.

This article provides general real estate information and is not legal or tax advice. Property assessments, tax rates, exemptions and appeal procedures vary by jurisdiction and individual circumstances. Buyers should verify property-tax information with the applicable local taxing and assessment authorities and consult qualified tax or legal professionals when appropriate.