Property tax cuts coming for Idaho homeowners through new state law

Clark Corbin

In November, Idaho homeowners will know how much of a break they will get on their property taxes through a new state law.

The savings will be calculated for each individual taxpayer and appear on their property tax notice, which counties send to homeowners by the fourth Monday in November.

As of this week, it’s too soon for even the state’s top property tax experts to know what kind of break Idaho homeowners will get. But Alan Dornfest, the Idaho State Tax Commission’s tax policy chief, crunched the numbers using 2022 property tax totals. The money for homeowner’s property tax relief was 17.2% the total of all homeowners’ 2022 property taxes.

That number will change because levy rates will have gone up or down in many of the state’s 1,000 plus taxing districts. But Dornfest’s estimated percentage is similar to estimated cuts of 10% to 20% that legislators and Gov. Brad Little shared as they promoted House Bill 292, the property tax the Idaho Legislature passed earlier this year.

“There is real money there,” Dornfest said in an interview Wednesday. “I think that is what people need to know – yes, it can be done and we are not dragging our feet. We are making every possible effort, and we are going to get there.”

Between now and November, city and county officials are crunching numbers preparing a series of reports necessary to calculate reductions that eligible homeowners will see.

State tax experts don’t know the savings Idaho homeowners will see in November because local taxing district budgets were still being submitted to counties last week. Once counties receive the local budgets, counties will then set levy rates needed to fund those budgets and then submit that information to the state.

Here’s what homeowners can expect when it comes to the largest share of the property tax cut reduction package, the homeowner’ s tax relief program.

• To be eligible for the homeowner’s property tax reduction, homeowners must have received the homeowner’s exemption by the second Monday in July each year. Rental properties, second homes and vacation homes are not eligible.
• Homeowners who receive the homeowner’s exemption by the deadline don’t have to do anything else or submit any additional paperwork to receive the property tax cuts.
• The property tax reduction for each eligible homeowner will appear as a credit on their property tax notice, which will reduce the amount of taxes they owe. The combined property tax savings will be calculated for each taxpayer and labeled on their bill as “tax relief appropriated by the Legislature,” according to House Bill 292.
• The state will pay the counties, which will distribute the money to local taxing districts such as cities, school districts, sewer districts, fire districts or library districts. Certain property taxes, including bonds, school district levies, plant facility levies and any voter-approved temporary levies are not included in House Bill 292’s definition of eligible property taxes.

“The money does not go to the taxpayer directly, what happens is we pay the counties,” Dornfest said. “Then they distribute that, not to the taxpayers but to the taxing districts.”

Dornest estimated there is $192 million in state funding available for the homeowner’s tax relief program. There is an additional $24.5 million in additional tax relief for all property taxpayers. On top of that, Dornfest estimated there could be $106 million in tax reductions for school district facilities. Dornfest said the estimate for school district facilities could change based on the result of local school district elections held across the state in late August.

County, state officials worked together to prepare for tax cuts in Idaho

Ada County Treasurer Elizabeth Mahn said county officials have spent months working with tax commission experts and other officials to prepare to implement the new tax cuts. While Mahn said it is too early to tell how big the reductions will be for each homeowner, she said homeowners will see cuts.

“Everyone is working hard, and there will be savings there in 2023,” Mahn said in an interview. “The homeowner doesn’t have to do anything.”

“From what I can tell, the Tax Commission has been very receptive to our feedback; they have been working very closely with the counties,” Mahn added.

Mahn and Dornfest said a lot of the work to prepare to implement the taxes comes down to programming and reports.

The state of Idaho has 44 counties, more than 1,000 taxing districts and an estimated 480,000 or so homeowners who will be eligible for the tax cuts. All of that data has to be accounted for, and the Tax Commission cannot move forward with calculating the tax reductions until each of the local tax levies and that data is submitted to the state. After the Tax Commission reviews the property tax levy totals and the funding available for the homeowner’s tax relief, the commission will develop a factor to calculate the savings each taxpayer will receive.

The state will then send the money to counties in two chunks, with the first half sent out by Dec. 20 and the second half sent out by June 20, according to House Bill 292.

Idaho beginning to send funding to school districts

As part of the property tax law, the state is beginning to send out funding to school districts for the school facilities component of the law.

In a news release issued Thursday, Little said the state is sending an estimated $106 million to school districts through the law.

“Idaho already has the third lowest property taxes in the country, and we took steps this year to lower them further,” Little said in a written statement. “Idaho has delivered more tax relief per capita than any other state, and we’re proud to turn money back to the hardworking people of our state while making critical investments in schools and infrastructure to keep up with growth.”

The money for school facilities is distributed based on average daily attendance, which means the state’s two largest districts – West Ada and Boise – are receiving the largest chunks of funding. According to the state’s downloadable spreadsheet, the West Ada School District is receiving $14.5 million, while Boise is due to get $8.4 million.