by Nicole Piscitani • Feb. 22, 2025
For the past three years, home valuations have been historically high, resulting in homeowners paying higher property taxes. The Ohio General Assembly is set to address this issue through multiple property tax bills. It is likely that at least one property tax bill will pass during the next six months.
The homestead exemption is a reduction program that the legislature can use to address property taxes for certain individuals. Ohio’s constitution allows the legislature to give a property tax credit to homeowners 65 years of age or older who have a household income below a certain threshold, which is $40,000 for the current tax year. The threshold amount is subject to inflation. Additionally, the legislature has provided a homestead exemption for a homeowner who is an honorably discharged veteran of the armed forces with a total disability or the veteran’s surviving spouse in addition to a surviving spouse of an emergency responder who died in the line of duty. The legislature is limited in expanding eligibility for a homestead exemption. It’s important to note that the current law requires that the property tax credit be paid by the state of Ohio, meaning local governments that levy property taxes don’t lose local revenue. Instead, local governments receive state funds reimbursing the property tax credit.
Both the Ohio House and Senate have introduced bills that would expand homestead exemption eligibility. Some of these proposals maintain the state of Ohio reimbursing local governments; however, some would only partially reimburse local governments. The partial reimbursement further complicates school funding at the state level since the state share index includes the home values of those eligible for the homestead exemption. This would create a situation in which school districts not only receive less local revenue but also less state revenue. The homestead exemption is needed, and the legislature should look for ways to expand eligibility, but the legislature needs to consider how local and state school funding interact when considering the reimbursement language.
Similar to the homestead exemption, the legislature is also looking at a circuit breaker bill. A circuit breaker is a refundable income tax credit or rebate for homeowners and renters whose property taxes or a portion of their rent exceed a certain percentage. The legislature is currently considering 5% of someone’s income. Since the circuit breaker is an income tax credit, the state of Ohio would pay the credit, and local governments would still receive the local revenue from the homeowner or renter.
Another area of property taxes that the legislature is considering changing is the 20-mill floor. The 20-mill floor is the state-required millage that school districts need to levy to receive state funding. Currently, all fixed-rate levies and inside millage are used to calculate a school district’s 20-mill floor amount. Fixed sum levies — including emergency and substitute levels, bond levies and school district income tax (SDIT) — are not included in the 20-mill floor calculation. The legislature is considering changing the current law to require that all but bond levies be included in the calculation.
While this approach would help some Ohio taxpayers, it will not help them all. The number of school districts on the 20-mill floor has increased over the past few years. There are 611 Ohio school districts and, in tax year 2021, 293 districts were on the floor. The number of districts on the floor increased in 2022 to 352 and further increased in 2023 to 420. The increase is due to the reduction factors in Ohio’s Constitution that require that millage amounts be reduced during the reappraisal process. When considering bills that would require all but bond levies to be included in the floor calculation, it’s worth noting that changing what is included in the 20-mill floor calculation will not address property taxes across the state since roughly half of the 420 districts on the floor have emergency and substitute levies.
Additionally, as it pertains to SDIT, there would likely be constitutional issues with combining property and income taxes in the calculation. The Ohio Constitution specifies that a floor can be established with respect to the “taxes charged for current expenses against the land and improvements [in the subdivision].”
These are three areas that the legislature is currently exploring through recently introduced bills. The legislature is expected to introduce other property tax bills that would consider other ways to address this issue.