Real estate investors may be a little skittish about property taxes in Chicago and Cook County, and I can understand why. 

The media covers the administration's dysfunction. News stories talk about pension funds being upside down and getting worse. Many say taxpayers will pay the price for the city's financial mistakes over the last six decades. They say that as commercial property vacancies stack up and the prices for commercial real estate in general fall, this will create a larger tax burden on the rest of us. 

The worst part about being a real estate investor in Cook County is the issues around property taxes, and the best part about being an investor in Cook County is the issues around property taxes. When people hear about the problems mentioned above, the majority of them run. That leaves an opportunity for people who understand the system and know how to work it.  

I’m not going to sugarcoat this: we’ll probably see short-term increases or long-term restructuring on how taxes are assessed and how the administration runs. As a real estate investor or smaller landlord, I see the long-term restructuring being less impactful. Meanwhile, the short-term increases can be absorbed if you buy right. Are you ready for the 2024 Chicago property reassessments?

Recently, we had Cook County Assessor Fritz Kaegi on the SUCI podcast to explain how property taxes are assessed in Chicagoland. You can watch the full video below.

Cook County Property Taxes 101

Before we dive into how you should handle Cook County property taxes as an investor, let’s cover how your tax bill amount comes to fruition.

How Often Does Cook County Reassess Properties?

Cook County reassesses properties every three years. The assessment reflects the changes in a property's value over the previous three years. In other years, the assessment may change based on increases in occupancy, new construction, or other things the County deems important.

Is the Assessed Value the Same as the Property Value?

In Cook County, a residential property’s assessed value is only 10% of its market value. The Cook County Assessor’s Office determines a fair market value of a property based on recent sales of comparable homes. The office then calculates the assessed value at 10% of that fair market value. In 2023, the Cook County Treasury Office collected more than $18.3 billion, an increase of $706 million.

How Cook County Applies Tax Rates

Cook County applies tax rates based on the property’s equalized assessed value and the amount of money the local taxing district needs to operate for the year. To calculate a property’s tax bill, the Tax Commissioner deducts any exemptions from the assessed value to determine the net assessed (aka taxable) value. The net assessed value is multiplied by the millage rate to get the final property tax amount. 

Does Cook County Assess Residential and Commercial Properties Equally?

Cook County uses a different system that assigns assessment levels to different classes of property. Assessment levels range from 10% of market value for residential property to 25% of market value for commercial property. Commercial properties are valued according to use, estimated income and expenses, and market-level vacancy. 

What Exemptions In Cook County Can Reduce My Property Tax?

Now that you have an idea of how your tax bill comes about let’s cover a few exemptions that would minimize your tax liability. There are more exemptions listed on the Illinois Revenue site, but the following are the most common in Cook County. 

General Homestead Exemption 

The General Homestead Exemption in Illinois, available on homeowners' primary residences, is one of the most frequently claimed exemptions. It reduces a property's equalized assessed value by $10,000 in Cook County, $8,000 in adjacent counties, and $6,000 in the remaining counties of the state.

Senior Citizens Homestead Exemption

The Senior Citizens Homestead Exemption is for homeowners 65 years and older for their primary residence. Cook County and counties contiguous to Cook County provide a maximum $8,000 cut in equalized assessed value with the completion of an annual application. All other counties in the state offer a $5,000 reduction.

Low-Income Senior Citizens Assessment Freeze Homestead Exemption

The Low-Income Senior Citizens Assessment Freeze Homestead Exemption (SCAFHJE) is available for homeowners aged 65 or older with a total household income below $65,000. This exemption freezes the home's equalized assessed value at the time of exemption qualification and approval. Maintaining the equalized assessed value prevents any increases in value due to inflation. Applicants must file Form PTAX-340 annually with the Chief County Assessment Office, 

Chicago Real Estate Opportunities

Despite the negative publicity surrounding Chicago and Cook County, there are many opportunities for real estate investors who understand how to minimize risk. Here are three tips for investors considering properties in the area:

1. Plan for Increases

You can pretty much guarantee that taxes will never go down. At the same time, we’ll never expect to see taxes go up more than an average of 5% year-over-year across a 10-year span. So, just plan for it like any other expense, even if you don’t like it. Think of it as planning when your furnace dies and needs replacing. If you have a plan to pay for it without breaking the bank, it typically isn't a major problem. 

2. Appeal Your Property Taxes

If you buy in Cook County, review your property taxes each year with a property tax professional. There are multiple ways to appeal property taxes in Chicago. Rather than accepting the cost and dying a little bit as you write the check, see if you can find an opportunity to reduce your assessed value and protect your investment. 

3. Take Advantage of Incentives

You can also find additional programs to help offset some of the tax bill increases, including some of the tips below:

1. Owner-Occupied House Hacking
   Many real estate investors begin as house hackers because it offers a lower barrier to entry, If you are a house hacker, living in the building and renting out other units, you can qualify for a homeowners exemption, which can reduce your annual bill.

2. Renting through the Housing Choice Voucher Program
   Many investors shy away from owning subsided rental housing because they don’t understand how it works. Offering affordable housing through the Chicago Housing Authority’s (CHA’s) Housing Choice Voucher (HCV) (formerly Section 8) program can be a great investment strategy. The key is to fully understand the entire workflow, so it helps to learn from others who specialize in this type of investment.

3. Own A Building with More Than Seven Units
   In 2023, Cook County released the Affordable Housing Special Assessment Program (AHSAP). Learn how to reduce assessed value by listening to our full interview with Cook County Assessor Fritz Kaegi and Stacie Young, president and CEO of the Community Investment Cooperation (CIC). 

Your Next Real Estate Investment Opportunity

Navigating the complex property tax world can be overwhelming to even seasoned investors. That’s why it’s imperative to rely on the advice of experts in the field. 

Regardless of the type of investment, experts will watch the market to look for trends. They do their research and know when to buy “low” and so they later capitalize by selling “high” by playing the long game.  

This same concept applies to Chicago real estate investments, especially if you expect to have 10-30 years left in your investing career. If you’re considering your next real estate investment opportunity, take advantage of the opportunities available in Chicago and Cook County. Of course, we always recommend that you do your due diligence by speaking with experts and conducting your own research. 

If you currently own Chicago investment properties and are unsure whether to hold or sell them, you don’t have to figure this out on your own. We can guide you through the decision process by offering you advice from both a brokerage and property management perspective. By weighing different options for your rental portfolio, we can help you make the best decision for your investment goals.

GC Realty & Development has more than 20 years of experience in responsive real estate property management. We manage properties throughout the Chicago area, including Kane, Cooke, Lake, Mchenry, and Dupage counties, as well as downtown Chicago. 

The GC Realty team helps our property management clients navigate the complex maze of Cook County property taxes every year and can offer trusted resources for additional services. 

We want to be part of your team, and you want us to be part of yours. Schedule a free consultation today!

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