How are property taxes calculated & why did they go up so much?
As everyone has noticed, Tippecanoe County property taxes have increased. A couple of conditions have caused the increase. Since Tippecanoe County has 34 taxing units all with different tax rates and circumstances one answer does not fit all.
The Gross Tax amount that appears on your tax bill is a calculation of the property tax rate multiplied by the net assessed value. The tax rate is based on $100 of assessment. The Net Assessment is the total assessment less any property tax deductions. Statutes limit the amount of increases governmental units can increase from year to year. Some parts of the tax rate are outside the limit but a majority of the tax levies are controlled by this limit. The controlled levies may increase an amount equal to the non-farm income growth amount as calculated by the state. The increase for 2005 was 4.4%.
The property tax rate is a composite of the needs of local governmental entities. As you can see from these charts, the majority of taxes are used to fund the local school systems. For areas outside the city limits, that percentage is higher due to not having a city tax rate included.
The taxpayer does not pay the gross taxes. Certain credits are allowed which decrease the amount of taxes the taxpayer actually pays. One credit all taxpayers receive automatically is the Property Tax Replacement Credit or PTRC. This is a percentage of the Gross Taxes that the State pays. They use monies received from the State Sales Tax to fund this expenditure. Another Credit that owner occupied properties may receive is the Homestead Credit. In additional to a $35,000 assessment deduction, the taxpayer also receives a percentage deduction from the Gross Tax amount. The State funds a majority of this credit and the County adds funds received from the Local Option Income Tax receipts.
As you can see from the charts from the various locations in the county, generally the percentage of taxes paid by the State has decreased. One reason for the decrease is that PTRC is not paid for any Debt Service Tax amount. Debt Service increases occurred in the Lafayette School Corporation, the Tippecanoe School Corporation and the Otterbein Library. Taxing units within those areas saw percentage decreases to the PTRC percentage while both the PTRC and Debt Service remained constant in the West Lafayette Community School district.
The charts below show, in approximate percentages, the distribution of who pays the gross tax. The charts show the changes in distribution from 2004 taxes to 2005 taxes.