There’s a Homestead Exemption for That

Keith Staats, JD President, Taxpayers’ Federation of Illinois
Deciphering Today's State & Federal Tax Law

The Illinois General Assembly returned to Springfield, Ill., for the spring legislative session, where there’s been the usual flood of newly introduced legislation. Many of these bills would impose new or expanded property tax exemptions—some of which are homestead exemptions.

A homestead exemption is a type of property tax exemption that reduces the assessed value of residential property. The ways in which these exemptions are claimed vary from exemption to exemption and from county to county.

Notably, the Illinois Constitution and Property Tax Code outline the rules for full or partial property tax exemptions, including homestead exemptions. However, the constitution specifically limits the nature and extent of property tax exemptions that may be granted. According to Article IX, Section 6 of the constitution:

“The General Assembly by law may exempt from taxation only the property of the state, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes. The General Assembly by law may grant homestead exemptions or rent credits.”

Many of your clients may be unaware of how many homestead exemptions are available in Illinois—there’s quite a few. With the General Assembly convening on legislation that may increase income limits or create new exemptions, it may be a good time to brush up on what’s currently available to taxpayers.

Here’s an overview of some of the homestead exemptions available and the requirements needed to obtain them.

HOMESTEAD EXEMPTIONS

• General Homestead Exemption: May be claimed by an owner who occupies a residential property as their principal residence. It may also be claimed if there’s a leasehold interest in which a single-family residence is situated. In this case, the residence must be occupied by a person who has a legal or equitable ownership interest in the property or if they’re the lessee of the property, and the person is liable for the payment of property taxes. The exemption amount can be claimed up to $10,000 in Cook County, $8,000 in counties contiguous to Cook County, and $6,000 in all other counties.
• Homestead Improvement Exemption: May be claimed in an amount of up to $25,000 of assessed value that was added to a homestead property by any new improvement or rebuild after a catastrophic event. Additionally, the exemption continues for four years from the date the improvement or rebuild is completed and occupied.
• Natural Disaster Homestead Exemption: This exemption is for a rebuild of a residential structure following a natural disaster. The exemption amount is determined by comparing the equalized assessed valuation (EAV) of the residence in the first year the property owner applies for the exemption and the EAV of the residence in the year prior to the disaster occurring.
• Longtime Occupant Homestead Exemption: Applies to a very small subset of property owners who are in a county that’s elected to be subject to the provisions of the alternative general homestead exemption. According to the Cook County Assessor’s Office, only approximately 11,000 homes in Cook County qualify for this exemption. To qualify, individuals must have a household income of $100,000 or less. They must also have occupied the same homestead property as a principal residence or domicile for at least 10 continuous years or five years if they occupied the same homestead property and received assistance in the acquisition of the property under certain government or nonprofit programs. Additionally, the exemption amount is based on the greater of the EAV of the homestead property for the current tax year minus the adjusted homestead value or general homestead deduction.
• Persons With Disabilities Homestead Exemption: This exemption is a reduction of EAV of $2,000 on a primary residence occupied by a person with a disability. That person must be liable for the payment of the property taxes and be the owner or have a legal or equitable interest in the property. Leasehold interests are limited to single-family residences.

SENIOR CITIZENS EXEMPTIONS

• Senior Citizens Homestead Exemption: Available to people age 65 or older. The person must be the property owner or have a legal or equitable interest in the property, and they must be liable for paying real estate taxes on the property. This would include only leasehold interests on which a single-family residence is located. The maximum exemption amount is $5,000 ($8,000 in Cook County).
• Low-Income Senior Citizens Assessment Freeze Homestead Exemption: This exemption freezes the property’s EAV beginning with the year a senior citizen qualifies for the freeze. The maximum household income that qualifies is $75,000 for 2026, $77,000 for 2027, and $79,000 for 2028 and after.
• Senior Citizens Real Estate Tax Deferral Program: This isn’t a homestead exemption—it’s a deferral of property taxes. Eligibility for the program consists of persons age 65 and older who have owned and occupied a property as their residence for the last three years and whose maximum household income is $77,000 for 2026 or $79,000 for 2027 and after. An eligible taxpayer may defer all or part of the property taxes on their principal residence. With this program, the state pays the property taxes and places a lien on the property for the taxes, and the state recovers the money plus interest upon sale of the property.

VETERANS EXEMPTIONS

• Returning Veterans Homestead Exemption: Consists of a $5,000 reduction in the EAV of a veteran’s principal residence upon returning from active duty in armed conflict. The reduction is good for two years—the tax year the veteran returns from active duty and the following year.
• Standard Homestead Exemption for Veterans With Disabilities: This exemption is a reduction of the EAV on the primary residence owned or leased by a veteran with a disability. The veteran must be liable for the payment of property taxes. The amount of the reduction of the EAV depends on the extent of the veteran’s service-connected disability. A veteran with a disability of 30% but less than 50% receives a $2,500 reduction, 50% but less than 70% receives a $5,000 reduction, and 70% or more receives a $250,000 reduction. The reduction may also be received by an unmarried surviving spouse of a deceased veteran who received the exemption.
• Veterans With Disabilities Exemption for Specially Adapted Housing: Provides eligible disabled veterans with a reduction of up to $100,000 in EAV of their home. Specifically, this exemption is for veterans with a disability requiring specially adapted housing. The exemption is valid for as long as the veteran, spouse, or unmarried surviving spouse occupies the property.
• Veterans of World War II: For taxable years on or after 2004, veterans who were members of the armed forces during World War II receive a complete exemption from property taxes.

Beyond all these, other special homestead exemptions are available through affordable housing special assessment programs; a community stabilization assessment freeze pilot program (beginning Jan. 1, 2015, and ending June 30, 2029); and homes built in certain qualifying municipalities.

Overall, taking the time to understand the multitude of homestead exemptions can help secure the tax benefits your clients deserve and support their financial well-being.