How to Calculate an Effective Tax Rate for Your Community

October 15, 2014

Since the release of our 2012 Effective Tax Rates report on September 29th the Civic Federation has fielded many inquiries about how to calculate the rates for municipalities outside the study. In response, this blog will go through the steps to calculate an effective tax rate for tax year 2012 (taxes payable in 2013) and provide links taxpayers can follow to gather the data they need to estimate effective rates in their own communities.

An effective tax rate estimates what percent, on average, of a property’s value is paid annually in taxes. The Federation’s study looks at 32 communities in six counties in northeastern Illinois. For simplification purposes, in this blog we will focus only on residential properties because there were enough sales of Class 2 residential properties in each Cook County township but one[1] in 2012 to calculate a median level of assessment. The collar counties do not use classification, but instead assess all properties at 33 1/3% of fair cash value for the purpose of property taxation.

The effective tax rate formula is simple and requires three pieces of data that are generally available online. Read this blog post to learn more about effective tax rates. When calculating an effective tax rate using our methodology, it is important to keep in mind that an effective property tax rate is an average calculation that offers a method of comparing residents’ property tax burdens across municipalities and counties. It does not show an individual taxpayer’s effective tax rate (though that is simple enough to calculate) but instead gives an estimate of the property tax burden in a community.


The Necessary Data

In order to calculate a community’s effective tax rate, three readily available numbers are needed:

  1. The Median Level of Assessment for your township, or for Cook County in this blog, for residential properties in your township. The median level of assessment is calculated by the Illinois Department of Revenue and compares the assessed value of properties to their sale prices to get an idea at what percentage of full value properties are assessed.
  2. The Equalization Factor (also known as the Multiplier) for your county. All counties but Cook will have a number around 1.0. Cook County assesses different types of property at different levels, so its number is considerably higher.
  3. An aggregate tax rate for a tax code in the community you wish to study. A municipality will generally have many tax codes that account for different school districts and other local governments to which each property pays taxes. The aggregate tax rate adds up the tax rates for each of the local governments allowed to tax the properties located in a certain tax code.


Where to Find the Data

The second two numbers for 2012 are available on the Illinois Department of Revenue’s website.

Tax rates for tax year 2012 are available from each county’s clerk’s office. The following table shows where to find 2012 tax codes online for Cook County and the collar counties.

Cook County

To find tax codes for major municipalities, see the sample composite rates here. To look for a specific tax code’s aggregate tax rate, see the 2012 column in this document.

DuPage County

2012 Tax Rates, DuPage County Clerk

Lake County

This document shows the rate at which the largest number of properties are taxed. Township tax codes can be found on this page for 2012 by scrolling down.

McHenry County

2012 Tax Rates, McHenry County Clerk

Kane County

2012 Tax Rates, Kane County Clerk

Will County

2012 not available online. Contact the Will County Clerk’s Office to get aggregate tax rates by township, 815-740-4615.


How to Calculate an Estimated Effective Tax Rate

Multiply the three numbers described above to calculate an effective tax rate for your community. The tax rate and median level of assessment are expressed as percentages, and so must be multiplied as decimals or in a spreadsheet that recognizes percentages and multiplies them properly for the calculation to work.

As an example, we will calculate an effective tax rate for Oak Lawn, a village not included in the Civic Federation’s Effective Tax Rates report.


Step one: Find the aggregate tax rate for a tax code in the municipality.

In the case of Oak Lawn, we looked at the Cook County Clerk’s 2012 Tax Rate Report, page 72, to find an aggregate tax rate for a portion of the village. Tax code 39022 had an aggregate property tax rate of 11.898% for 2012.


Step two: Find the Equalization Factor for your County.

Oak Lawn is located in Cook County, so its 2012 equalization factor was 2.8056.


Step three: Find the median level of assessment for your township.

Oak Lawn is located in Worth Township, so we looked for the median level of assessment for Class 2 Residential properties in Worth Township, which is listed under Cook County. Use the “Adjusted Median” column. For Worth Township, the adjusted median level of assessment for residential properties in 2012 was 12.85%.


If you multiply the Worth Township Class 2 property median level of assessment of 12.85% (0.1285) by the Cook County Equalization Factor of 2.8056, you get 36.05%, which is the approximate percentage of a residential property’s value that is taxed in Oak Lawn.

Multiply 36.05% (0.3605) by the selected tax rate of 11.898% (0.11898) in Oak Lawn and multiply by 100 to get the approximate total percentage of a residential property’s value that is paid annually in property taxes in Oak Lawn.

While finding the numbers to calculate an estimate of the effective tax rate in your community is a bit time consuming, it can be a very powerful tool for comparing property tax burden between communities.

To calculate your individual property’s effective tax rate, all you have to do is divide your annual tax bill by what you estimate to be the market value of your property. So, if you own a property worth $300,000 and your annual tax bill is $10,000, then your individual effective tax rate is 3.33%.

[1] A median level of assessment was not calculated for any type of property in Calumet township in 2012.