by Lou Mancinelli
More than 100,000 homeowners can benefit from an annual $30,000 homestead tax exemption now available from the city, but many have thus far overlooked or missed out on the opportunity.
City Council members gave preliminary approval for a bill to extend the deadline for a $30,000 annually renewable homestead exemption tax reduction available to all Philadelphia homeowners under the Actual Value Initiative (AVI) at their primary residence until Sept. 13.
City Finance Director Rob Dubow testified at a City Council hearing last week that Office of Property Assessment (OPA) officials think more than 100,000 homeowners have yet to apply for this benefit. The proposed extension, a second, would move the deadline from July 31 to Sept. 13. The original deadline was Nov. 15, 2012.
The benefit enables homeowners to receive a $30,000 deduction on their tax bill based on the value of their most recent home assessment, which was reassessed to reflect market value by OPA staff this year. To qualify, homeowners must apply from their primary residence.
Individuals who own more than one home can only apply the benefit to their primary household, according to Anna Adams, Dubow’s chief of staff. Once applied, the benefit continues to affect the tax bill each year. A new homeowner, or one who misses the deadline this year, can apply next year.
Of the 340,000 households the City thinks are eligible for the exemption, 193,000, or 57 percent, had been approved for the benefit by April 22, according to Kathryn Dreher, project administrator for the OPA.
City Council members have criticized the Nutter administration’s outreach efforts, Philly.com reported. When informational outreach brochures were mailed to homeowners last fall, at a cost of $414,000, according to Philly.com, they included only English versions with many translated versions available online.
Sixty percent of households in the neighborhoods in the northwest area of the city have applied for the benefit, according to Dreher. The neighborhood that has been the least responsive is located in Councilwoman Maria Sanchez’s district, the 7th, an area known for its Hispanic population. According to 2010 census data, 21 percent of Philadelphia households speak a language other than English at home.
According to Dreher, the OPA plans to increase its outreach efforts by including inserts that include a Spanish translation with water bills this spring. For those who need additional help or need to apply in a language other than English, the best way to discuss options is to call 215-686-9200, according to Adams.
The recent tax assessments are the results of a recalibration and updating of the system used to determine a home’s value, according to Adams. A long-outdated system prompted city officials to overhaul old numbers and reevaluate the value of each home in the city – some 579,000 – she said. This year’s tax bill reflects the first changes under the new system.
While the commercial element of the assessment system had been updated over the years, according to Adams, the residential arm remained unchanged, updated in some neighborhoods, and not others. The new assessments are more reflective of the current market rate, according to Adams.
“The system has been broken for a long time,” she said.
In order to offset a large spike in tax revenue caused by the new value in homes, where in some places a home’s 2014 value has been assessed at twice its 2013 worth, and to mitigate the rise in costs for some homeowners, city officials drafted the homestead exemption benefit, according to Adams. OPA officials foresaw a shift in tax burden from commercial to residential properties as a result of the new system.
The exemption “allows that shift to come back,” she said.
That outdated system is what caused some properties to experience a drastic change in worth. A Philly.com story reported on the owner of a two-story, brick row house on 3rd Street near Cambria in the city’s Fairhill section of North Philadelphia, whose house was assessed at $10,400 in 2013. In 2014, the house was assessed at $160,000. That would cause the tax bill to rise from $325 to $2,000, according to the article. The exemption would mean $180 in savings.
In some cases, according to Adams, it is possible the OPA made mistakes in reassessment values. In other cases, it may be that is what the house is worth and it has been years since a correct value had been indicated at some properties. Those who think there has been a mistake in the reassessment of their home should contact the OPA.
In addition to the new home assessments, the overhaul of the assessment system meant a dramatic reduction of the tax rate. Before, to calculate the tax residents multiplied the assessed value of their home by 32 percent, then applied the 9.771 percent tax rate to that result. The new AVI system takes the assessed value of the home and multiples it by a 1.3204 percent tax rate to determine the bill. OPA staff claim it constitutes a more accurate system.*
In addition to the homestead exemption, the city offers various other tax relief programs. The Low-Income Senior Citizen Real Estate Tax Freeze enables eligible low-income senior citizens who apply by October to keep their real estate taxes and rates in the next year and all future years from increasing.
The Property Tax/Rent Rebate Program is for eligible individuals age 65 and older, widows and widowers age 50 and older, and people with disabilities age 18 and older. The income limit is $35,000 a year for homeowners and $15,000 annually for renters, and half of Social Security income is excluded. There is also a disabled veterans and economic hardship program.
For more information, visit www.phila.gov/opa/abatementsexemptions/pages/homestead.aspx, or call 215-686-9200.
*Editor’s note: Curt Heintzelman at the Office of Property Assessment pointed out that the 1.3204 tax rate is not final. The final rate will eventually be determined when a bill is passed. Here is what he said:
“Under the new AVI system, the full assessed value of the home is multiplied by a much lower tax rate – Mayor Nutter has proposed 1.3204 percent – to determine the bill. While City Council and the Mayor will set the official tax rate later this month, OPA staff claim that AVI and the lower tax rate constitute a more accurate and easy to understand system.”