Are Changes Coming to Ohio's Homestead Exemption Program?

New legislation introduced in Columbus looks to expand this property tax relief program

Recently, two State Representatives from the Northeastern part of the state (Rep. Jack Daniels and Rep. David Thomas) teamed up to introduce a new bill that would dramatically change Ohio’s homestead exemption law and homeowner occupancy credit; both of which are foundational pillars of Ohio’s property tax system. This publication has talked about other recently introduced legislation that seeks to make changes to Ohio’s property tax system:

House Bill 61, introduced in the Ohio General Assembly for the 2025-2026 legislative session, proposes significant changes to Ohio's homestead exemption program. This legislation aims to modify the amount of homestead exemptions and the owner-occupancy property tax credit, potentially providing greater tax relief for eligible homeowners across the state.

The homestead exemption is a property tax reduction program that benefits senior citizens, disabled individuals, and certain surviving spouses by reducing the taxable value of their primary residence. Currently, the standard exemption reduces the taxable value of a home by $28,000 for eligible homeowners with incomes below $40,000 per year. Disabled veterans and surviving spouses of public service officers killed in the line of duty qualify for an enhanced exemption of $56,000, regardless of income.

HB 61 seeks to expand these benefits substantially. The bill proposes increasing the standard homestead exemption from $28,000 to $50,000 of a home's true value. This significant boost would provide greater tax relief for seniors and disabled homeowners who meet the income requirements. For disabled veterans and eligible surviving spouses, the enhanced exemption would increase from $56,000 to $100,000, offering even more substantial property tax savings for these groups.

One of the most notable aspects of the proposed legislation is the removal of the current income threshold for the standard homestead exemption. Under the current law, homeowners must have a total household income of $40,000 or less to qualify for the exemption. HB 61 would eliminate this income requirement, potentially expanding eligibility to a much broader range of homeowners across Ohio. This change could significantly increase the number of residents who can benefit from the homestead exemption program.

The bill also addresses the owner-occupancy tax credit, which currently provides a 2.5% reduction in property taxes for homeowners who occupy their residences. HB 61 proposes to increase this credit to 7.5%, offering additional tax relief for owner-occupants regardless of age or disability status.

To ensure that local governments and school districts are not adversely affected by these expanded exemptions, the bill includes provisions for state reimbursement. It proposes that the state reimburse school districts for 50% of their tax losses resulting from the expanded exemptions, while other taxing authorities would be reimbursed for 100% of their losses. This approach aims to balance increased tax relief for homeowners with the fiscal needs of local entities that rely on property tax revenue.

The proposed changes in HB 61 would have far-reaching effects on Ohio's property tax landscape. By increasing the exemption amounts and removing income restrictions, the bill could provide substantial tax relief to a much larger number of Ohio homeowners. This expanded relief could be particularly beneficial for fixed-income seniors and disabled individuals who struggle with rising property taxes.

However, the legislation also raises questions about its fiscal impact on the state budget. The increased reimbursements to local governments and school districts would require significant state funding. Policymakers will need to carefully consider how to balance these costs with other budgetary priorities.

The removal of the income threshold for the standard exemption represents a significant shift in policy. While this change would extend benefits to more homeowners, it also moves away from the current model of targeting relief to those with lower incomes. This could spark debate about the most effective and equitable way to provide property tax relief.

For disabled veterans and surviving spouses of public service officers killed in the line of duty, the proposed increase to a $100,000 exemption would provide substantial additional support. This enhancement recognizes the sacrifices made by these individuals and their families, offering significant property tax relief as a form of ongoing support.

The increase in the owner-occupancy tax credit from 2.5% to 7.5% would benefit a broad range of homeowners, not just those eligible for the homestead exemption. This change could encourage home ownership and provide relief to families across various income levels.

If enacted, HB 61 would represent one of the most significant expansions of property tax relief in Ohio in recent years. It would fundamentally alter the structure and reach of the homestead exemption program, potentially benefiting hundreds of thousands of additional homeowners across the state.

However, the bill's progress through the legislative process remains to be seen. As with any major tax policy change, it is likely to face scrutiny regarding its fiscal impact, equity considerations, and potential unintended consequences. Legislators will need to weigh the benefits of expanded property tax relief against the costs to the state budget and potential impacts on local government finances.

In conclusion, House Bill 61 proposes a transformative change to Ohio's homestead exemption program and property tax relief landscape. By significantly increasing exemption amounts, removing income restrictions, and enhancing the owner-occupancy credit, the bill aims to provide broader and more substantial property tax relief to Ohio homeowners. While these changes could offer welcome relief to many residents, they also present complex policy and budgetary considerations that will likely be the subject of robust debate as the bill moves through the legislative process.

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