04/09/2012 Council Packet - Laserfiche WebLink

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Anoka County City of Lino Lakes Understanding Recent Changes to Homestead Benefits continued. COMPUTATION OF CREDIT AND EXCLUSION AMOUNTS Even though the tax benefits of the credit and the exclusion are not equal, the calculation of the exclusion amount is similar to the calculation of the former credit. Both reach their maximum at 576,000 of market value (S304 for the credit; 530,400 for the exclusion). Both reduce to SO at about 5414,000 of market value. Credit = 0.4% of the first 576,000, minus 0.09% of the value over 576,000. Exclusion = 40% of the first 576,000, minus 9% of the value over 576,000. Example: A house valued at $116,000. Credit = (0.4% x $76,000) — (540,000 x 0.09 %) Exclusion = (40% x 576,000) — (S40,000 x 9%) = $304 — 536 = 530,400 — 53.600 = $268 = $26,800 WANT MORE DETAILS? CONSIDER THIS THEORETICAL ILLUSTRATION Sim r,ar.y ccmputeo amounts do not yield equa' "•enefits: AVERAGE TAX RATE ILLUSTRATION Old Law: Credit Estimated Market Value Exclusion Taxable Market Value Class Rate Net Tax Capacity Tax Rate Gross Tax Credit Net Tax New Law: Exclusion 5116,000 5116,000 50 $26,8OI $89,200 1% 5892.- 110.920% 1,227 $989 5268 50 5959 $989 5116,000 1% 51,160 105.810% LOW TAX RATE ILLUSTRATION Tax Rate 63.486% Gross Tax Credit Net Tax 5736 5268 5468 66.552% 5594 50 5594 NOTE: This illustration does not reflect an actual location. Let's say you live in a house valued at $116,000. Under the old law the full value was taxed, but the new exclusion lowers the taxable value. Different classes of property are taxed at different levels. The first 5500,000 of homestead value has a rate of 1 %. (Higher value has a rate of 1.25%) "Net tax capacity" is a term describing the taxable value after class rates are applied. Again, this is lower under the new law due to the exclusion. Tax rates increase because the exclusion shrinks the taxable value. This illustration shows statewide average rates before and after the change. The gross tax under the old law was higher because there was no exclusion, but the credit reduced the net tax. Under the new law the gross and net are the same. Here the increase is modest, but... Tax rates affect the relative strength of the exclusion because multiplying excluded value by a low rate is less beneficial than multiplying it by a high rate. So, under a "low tax rate" example, the increase in tax is more extreme. WHAT ELSE AFFECTS MY TAXES (IN ADDITION TO THE HOMESTEAD BENEFIT)? Local levy decisions, including the effects of changes in state aid and local budget priorities. Market forces can affect property taxes in two ways: • The value of your property may increase or decrease. • The value of other properties may increase or decrease and change the share that your property is of the total tax base, whether your property's value changed or not. Various other changes (the classification or your property, eligibility for other benefits, and miscellaneous law changes) may also affect property taxes.