Could property tax relief help me owe less to Philly government?

Property-tax relief could help you. But it could also hurt, depending on what property you own.

Here are several types of tax relief Philadelphia’s City Council is thinking about offering:

Homestead exemption

The homestead exemption is tax break for homeowners. It excuses them from paying property taxes on a portion of their home’s value.

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City Council has already passed a $30,000 homestead exemption, but that could change in value.

 The Council President’s office says the value currently on the books was a “placeholder” that will be reexamined now that the citywide reassessment is complete.

Here’s how the exemption works: Say the city’s assessors put your home’s market value at $200,000. If the exemption continues to be $30,000, then you’ll pay taxes at a value of $170,000.

That means your bill would be $2,380 under a 1.4 percent rate. (Your bill is calculated by multiplying your assessment by the property tax rate.)

Where’d we come up 1.4 percent? That’s Philadelphia’s estimated property tax rate for 2014 under a revenue-neutral package that includes a $30,000 homestead exemption.

Without a homestead exemption, city officials estimate that the rate would be about 1.25 percent. Under that scenario, the $200,000 home would get a bill of $2,500.

Supporters of the homestead exemption say it will benefit the average homeowner. They also point out that it could help address a consequence of the Actual Value Initiative (AVI) — that it will shift the property-tax burden from businesses and industrial property owners to homeowners. 

Businesses won’t qualify for the homestead exemption, so taking that step would shift a little more of the tax burden back to them. 

But critics say there’s a downside to the homestead exemption: By reducing the overall tax base, it drives up the tax rate. 

And business and industrial property owners would take the biggest hit from that, perhaps hampering job growth.

Also, renters likely would get nailed, since their landlords (whose income-producing properties would not qualify for the exemption) will pass the cost of higher tax bills onto their tenants. 

Means-tested gentrification relief

Gentrification relief is a tax break for longtime homeowners whose property values have skyrocketed. 

 Gentrification is the term for what happens when more affluent people start buying up homes in an older neighborhood, driving up property values, and taxes, for long-time residents.

For example, Councilman James Kenney worked on a bill last year that would cap how much your tax bill can go up — but only if you’ve lived in the same property for more than 10 years.

The state doesn’t allow Philadelphia to apply a “means test” when considering if a property owner is eligible for gentrification relief. That means wealthy residents could potentially benefit from it.  

State Rep. Michael O’Brien of Philadelphia introduced a bill in the House that would let Philly use a means test for gentrification relief based on age and income. City Council members have expressed support for this bill, saying it could help needy taxpayers.

Like any tax relief, it would also drive up the tax rate.

Other assorted ideas

State Rep. Michael McGeehan of Philadelphia introduced a bill that would give the city the ability to let owners pay their property taxes in periodic installments.

Another state bill proposes to amend Pennsylvania’s Constitution in order to allow the city to tax commercial and residential properties at different rates. In other words, it would help address the fact that the property tax burden would shift from businesses to homeowners under AVI. 

However, that won’t happen this year. Changing the state Constitution takes several years.

Council is also thinking about capping how much property tax bills can go up in a single year.

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