Homestead exemption: The tipping point

Posted: February 22, 2013

WINNERS AND losers" - it's a phrase heard often on the floor of City Council, especially when it comes to taxes. The phrase peppered the debate last summer over the city's move to the Actual Value Initiative as Council grappled with questions over who stood to gain most or be hurt by the citywide reassessment.

The phrase has come around again as Council works to put the finishing touches on AVI, including the so-called homestead exemption, which forgives taxes up to $30,000 for resident homeowners. But Council can still raise that rate, lower it or throw out the exemption altogether. There will, of course, be winners and losers - and the point at which they separate, the "tipping point," depends on Council's decisions.

On its face, the exemption would appear to make for a lot more winners than losers. Estimates vary, but the Nutter administration guesses that something like 320,000 of the city's roughly 469,000 residential properties would qualify, and he expects that about 90 percent of eligible residents will apply.

But getting the exemption doesn't necessarily make a homeowner a "winner." The exemption comes with an increase in the overall tax rate, which current estimates have moving from about 1.25 percent to about 1.4 percent if the exemption is kept. The exemption also becomes less valuable the higher a property's value is until, at the tipping point, the higher tax rate costs more than the homestead exemption saves.

Read the rest of this story at AxisPhilly.org.

|
|
|
|
|