Since tax year 1983, the state of Illinois has offered individual income tax filers property tax relief for real estate taxes paid on a principal residence. Currently, single filing taxpayers with incomes up to $250,000 (and $500,000 for taxpayers married filing jointly) can receive a credit on their income taxes worth 5% of real estate taxes paid for the tax year. For tax year 2018, just over 2 million tax filers took the property tax credit for an amount totaling nearly $513 million dollars.
In this proposed budget for Fiscal Year 2023, Governor J.B. Pritzker proposed a one-time additional property tax rebate of up to $300. This rebate is estimated to cost the state $475 million.
Yet, according to 2019 census data of Illinois occupied housing units, one-third of occupied housing units are rental-occupied units versus owner-occupied units. Furthermore, 73% of white non-Latinx residents in occupied housing units lived in owner-occupied units versus just 34% of African-Americans living in owner-occupied units.
Individuals in rental units do not benefit directly from the tax relief provided to homeowners through the property tax credit. While it is possible a building owner receiving some property tax relief may pass it on to renting tenants, there is no guarantee of that.
Twenty-three states and Washington, D.C., address similar situations with some form of a renter’s credit or deduction. Some apply the credit to just seniors or the disabled, but others provide a credit that may be based on a percentage of rent paid or the actual rent paid up to a maximum level. For example, Wisconsin allows qualifying renters (those with household income less than $24,680 for 2021) a credit that can reach a maximum value of $1,168. Indiana allows qualifying tax filers to deduct up to $3,000 or the amount of rent paid, whichever is less, on the state’s income tax form.
Midwestern states and renter’s credits*
|Indiana||Renters whose unit is subject to property taxes can deduct up to $3,000.|
|Iowa||Rent reimbursement program for those 65 or older or at least 18 with a disability, with a household income less than $24,354. Reimbursement varies by income.|
|Michigan||A credit for qualifying households where the percentage of rent attributable to property taxes (determined to be 23%) exceeds 3.2% of total household resources ($60,600 or less to qualify). Sixty percent of determined value. Higher rates for seniors and the disabled. Maximum value $1,500.|
|Minnesota||Applies to renters whose income is less than $64,920. Refund based on 17% of rent paid. Maximum refund amount $2,210. Unit subject ot property taxes.|
|Missouri||Applies to individuals 65 or older, or disabled, with household income $27,500 (single filers) or less. Unit must be subject to property taxes. Value varies by income. Maximum credit value of $750.|
|Wisconsin||Income less than $24,680. Unit subject to property taxes. Value varies on income. Maximum credit is $1,168.|
*Additional conditions may apply.
These provisions allow many renters in those states to deal with housing cost burdens – which depending on your income level can be very high. Usually, lower-income households face the greater housing burden. For Illinois households with incomes between $10,000 and $20,000 in 2019, 80% spent 30% or more of their income on rent. That compares to just 4.3% of Illinois residents with incomes of $75,000 or more spending 30% or more of their income on rent. Furthermore, when an examination is of pre-pandemic data of all renters by race and ethnicity, a far greater percentage of African-American and Latinx low-income renters are paying more than 30% of their income in rent.
High housing costs can lead to housing instability. A study by Boston Medical Center found three forms of housing instability (being behind on rent, multiple moves, and a history of being homeless) were associated with adverse caregiver and child health among low-income renter households.
If Illinois offered a housing tax credit, similar to the property tax credit, to individuals at or below 200% of the Federal Poverty Level, who have lived in Illinois for at least half the year and are paying more than 30% of their income towards rent – the Institute on Taxation and Economic Policy estimates it would cost the state $171 million annually -probably less depending on how many tax filers claim the credit.
Currently, Illinois offers a Rental Payment Program with financial assistance for rent to income-eligible Illinois renters and their landlords who have been impacted by the pandemic. It is not designed to assist with rental costs going forward. The Illinois Department of Human Services offers a homeless prevention program and emergency housing assistance to those at risk of becoming homeless. There are federal programs offering vouchers to eligible families, but the Center on Budget and Policy Priorities estimates just one in four potentially eligible families received any type of rental assistance before the pandemic.
As we emerge from the pandemic, a time that also saw a sharp increase in demand for home sales that has impacted the rental market, even more individuals will likely face challenges in meeting their rent payments. Across the United States, rents last month were 17.6% higher than they were in February 2021. That increase is the fastest growth rate in the past 20 years. Given the stark difference by race in home ownership, with more than half of the Illinois African-American owner-occupied units rentals, it is important to provide a renter’s income tax credit if Illinois is going to address racial and ethnic economic inequities. A renter’s credit would help more individuals facing a rental cost burden, create greater equity with housing income tax credits, and create more housing stability for parents and children. It should be part of the final budget package the legislature approves for Fiscal Year 2023.
Written by Mitch Lifson
 Sandel M, Sheward R, Ettinger de Cuba S, et al.;Unstable Housing and Caregiver and Child Health in Renter Families. Pediatrics. 2018;141(2):e20172199
 Fischer, Will, Sonya Acosta, and Erik Gartland; “More Housing Voucers: Most Important Step to Help More People Afford Stable Homes”, Center on Budget and Policy Priorities, May 13, 2021.
 Hernandez, Kristian; “As Rents Soar, States Take Aim and Local Zoning Rules”; Stateline; March 15, 2022.