INDIANAPOLIS | The property tax relief checks lawmakers decided to send homeowners could cause headaches when federal tax time arrives, and one Porter County official already considers the rebates a major pain.
Prodded by estimates showing residential bills could soar 24 percent this year, state legislators voted to spend $300 million on partial property tax refunds, enough to send every homeowner a check for about $236.
It will be up to county auditors to calculate how much each homeowner gets and mail the checks, along with notices crediting the General Assembly for the refunds. Lawmakers didn't provide any funding for the legwork.
"I think they're nuts," said Porter County Auditor Jim Kopp. "They didn't even think about what's it going to cost to do this, or else they don't care, I don't know which."
Calculating the refunds, Kopp estimates, will consume about 4,000 staff hours, and it will cost roughly $16,000 to mail checks to 42,000 Porter County homeowners.
Lake County Auditor Peggy Katona estimates it will cost $52,000 in postage alone to mail checks to the county's 140,000 owner-occupied homes. But at an average of $236 per homestead, the refunds would add up to $33 million in relief for Lake County.
"That's well worth the $50,000 for postage," Katona said. "It's going to cost some money on the county's end, but I think the taxpayers will definitely appreciate it."
But the checks might not be mailed until early next year, forcing some homeowners to claim the rebates as income on 2008 federal income tax returns. If the checks do arrive before year's end, homeowners who deduct property taxes from their federal returns must remember to subtract the state refund.
"The only people who are going to have worry about it are people who itemize their deductions and take (off) their real estate taxes," said Pat Brummer, an Internal Revenue Service spokeswoman. "People who don't itemize aren't going to have to worry about it."
The IRS allows a standard deduction of $5,150 for individuals and $10,300 for married couples, so the new math created by the state property tax refunds isn't a burden for homeowners who file a simple federal return.
Lawmakers typically grant property tax relief through homestead credits automatically deducted before tax bills go out. But the state won't have the money to bankroll the refunds until it collects a windfall in gambling fees in November.
The refund checks will go directly to lenders in the cases of homeowners who pay taxes through an escrow account linked to their mortgages.
Breakout:
Property tax refunds
Homeowner will receive a rebate check of about $236 sometime around the first of the years.
If you pay taxes through your mortgage -- the check should go directly to your lender, but you'll get a notice stating the amount.
If you claim your property taxes on your federal income taxes: If the refund check comes this year, subtract the refund amount before deducting your property taxes. If the state refunds comes in 2008, you must claim the refund amount as "other income" when you file your 2008 federal tax return in April 2009.
