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On June 30, 2013, Governor Kasich signed the Ohio Budget Bill. The following are some of the significant tax changes in this new law:
- Decreases the personal income tax rate by 10% over the next three years;
- Implements a tiered minimum tax structure for the commercial activity tax;
- Increases the state-based sales and use tax rate from 5.5% to 5.75% and imposes sale and use tax on certain digital goods and magazine subscriptions; and
- Eliminates the state-paid 12.5% subsidy of the county and local property taxes, thereby affecting the homestead exemption on real estate property taxes.
The focus of this Article will be on the changes to the homestead exemption law.
The homestead exemption was initially established in 1971 and has been available to those individuals who have the opportunity to qualify and shield a part of their “homestead” (a dwelling and up to one acre) from real estate property taxation. However, for a number of years, a number of senior citizens and disabled Ohioans were excluded because there were certain income limitations. However, in 2007 these income limitations were removed. Currently, the homestead exemption is available to all eligible homeowners, regardless of income. These individuals have the opportunity to shield up to $25,000.00 of the market value of their residence from property taxation. Specifically, that means that a home valued at $90,000 will be generally taxed as if it was a $65,000.00 home, thus saving approximately $400.00 per year in real estate taxes.
The current homestead exemption is available to all homeowners 65 and older and all totally and permanently disabled homeowners. These individuals must apply to their local County Auditor in order to take advantage of the homestead exemption. Applications are permitted to be submitted in any year after the first Monday in January, and on or before the first Monday in June.
However, with the passing of the 2014 budget bill, for all property tax levies passed in 2014 and forward, the State will no longer subsidize 12.5% of the levy. That means that for tax years 2014 and forward, only individuals with a total income of less than $30,000.00 may apply for Ohio’s homestead exemption. For those individuals who already have the homestead exemption in place, they should not lose their exemption due to a high-income level. However, the change in the law will affect new applicants for the homestead exemption.
Therefore, if you are currently 65 or older or disabled, and are not currently receiving the homestead exemption, I suggest that a good planning opportunity exists for you to apply for the homestead exemption to get in before the change in the new law. You should submit this application as soon as possible to the County Auditor in order to receive this homestead exemption under the current law and be grandfathered going forward. In addition, if you are a married couple and one of the spouses is currently 65 or over or disabled, you should consider transferring your homestead into the qualifying spouse’s name in order to obtain the homestead exemption. However, since each family is different, you should evaluate your situation in order to determine whether this transfer should occur.
If you have any questions regarding this homestead exemption matter, please do not hesitate to contact your local County Auditor or local estate planning, attorney.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663
Phone: 330-364-3472
Fax: 330-602-3187
Email: jcontini@www.kwgd.com