Possible Changes Ahead for the Illinois Disabled Veterans Tax Exemption

By Douglas Katz – 06/01/2023

I wrote and article several weeks ago about the shortcomings of the hugely generous but flawed Illinois Disabled Veterans Tax Exemption.  I do not want to rehash the entire article, but I am glad to say that there may finally be resolution and the resolution looks to be a good one.  From the research that I have done, the proposed changes take care of veterans while sufficiently dealing with non-veteran criticisms about means versus need and fairness.

The folks in Springfield have taken on the dreaded cliff that impacts Illinois disabled veterans when their Equalized Assessed Value (EAV) exceeds $250,000.  You should go back and read that article to understand EAV and the specifics of the exemption as it stands today, but for the uninitiated Illinois provides a tax exemption for veterans that could be as much as a complete waiver of real estate taxes.  At the aforementioned $250,000, the exemption goes away completely and the disabled veteran loses the benefit and is subject to the full tax bill, which is unequivocally bad.  It does, however, look like they have found a solution.

This bill is not just about the cliff and they are voting on some changes to the bill such as providing the full exemption to any World War 2 veteran, but the meat of the change is the change in how the exemption is impacted above the $250,000 EAV.  The new exemption if passed would turn the cliff into a cap.  Below the EAV limit, there is essentially no change.  Above $250,000, the veteran would pay any taxes in excess of the $250,000 which while adding the requirement to pay some real estate taxes, does protect them from colossal payment shock.

Because examples always help, assume that at $250,000 EAV you are paying $15,000 and you get assessed at $300,000 EAV the following cycle.  If the taxes at that EAV are now $18,750.  Under the old exemption, the veteran would pay the whole $18,750.  Under the proposed exemption, the veteran would pay $3,750.  Future increases would still be the tax bill less the $15,000 max benefit.  This is oversimplified with dummy numbers, but you get the point.

You can see throughout the article I use terms like proposed because the law is yet to be passed.  There is still the possibility that the cliff will remain and that vets across Illinois will lose their benefits, especially based on the home value appreciation over the last few years.  While I would rarely opine on this, I do see how the cliff created by current law not only impacts veterans directly, but that it also shapes buying decisions and migratory trends for both new veteran buyers and existing veteran homeowners alike.

I would encourage anyone who cares about veteran causes to urge your representatives in Springfield to fix the fatal flaw in the existing exemption to help them truly thank disabled veterans for their service and sacrifice. While we regularly beat up on our representatives, sometimes justifiably so, we should also laud them when they solve a problem like the one that has plagued this exemption since its inception and I am doing so now.  As a lender close to the problem, I made periodic impassioned appeals that they do something to fix the law.  If this passes, they finally will have and the change will have major positive impact on Illinois and its veterans.

Below are the details of the proposed changes plus one that I saw for fallen officers

 

Disabled Veteran’s Homestead Exemption for Veterans of WWII.

Expands the Disabled Veteran’s Homestead Exemption to include veterans of World War II, regardless of their level of disability. These veterans would receive a 100% reduction in their property’s assessed value (which corresponds to a $0 property tax bill) and would not be required to reapply for the exemption each year.

Removal of Honorable Discharge Requirement for Eligibility under the Homestead Exemption for Veterans with Disabilities.

Removes the requirement that a veteran has to receive an honorable discharge in order to qualify for the veteran with disabilities homestead exemption. Rather, it only requires the veteran to have a service-connected disability and receive disability compensation. The proposal also defines “service-connected disability” as a current Illinois or injury that was caused by or worsened by active military service, as certified by the US Department of Veterans Affairs, resulting in disability compensation.

Clarification of the Amount of the Homestead Exemption for Veterans with Disabilities and their Surviving Spouses.

Clarifies that the veterans with disabilities homestead exemption for a veteran with a service-connected disability of 70% or more or a surviving spouse of a veteran whose death was service-connected exempts the first $250,000 of a property’s equalized assessed value from property taxation while the rest of the property’s value is subject to taxation.

Homestead Exemption for Surviving Spouses of Fallen Officers and Rescue Workers Homestead Exemption

Creates a new homestead exemption for surviving spouses of fallen police officers and fallen rescue workers in an amount equal to 50% of the equalized assessed value of the property so long as the surviving spouse continues to reside at the qualified residence and does not remarry.

2 thoughts on “Possible Changes Ahead for the Illinois Disabled Veterans Tax Exemption”

  1. Changes to the taxation of ownwer occupied real estate for disabled veterans is long overdue and should be addressed with good speed. In addition consideration should be give to all veterans with any degree of disability on a scaled basis. For those of us that did not shy away for our obligation to defend our country any small consideration is long overdue and needed. Thanks for the article it was a good read and I trust action will soon take place in this matter.

    1. Great comments. The benefit does extend down to 30% for some degree of tax relief. The exemption is at 70%, but I get your point. I chalk this up to truly thanking veterans for their service and sacrifice. There is sometimes a dissonance in the public perception that disabled means so profoundly impacted that they cannot function. In reality, many veterans struggle with physical and psychological impact from their service, but still are able to work through them to function.

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