Understanding TIF Tax Computations

For properties included in a TIF District, the tax bill can be difficult to understand.

A TIF (Tax Increment Financing) is a funding tool used by local governments i.e. Cities/Villages, to encourage new economic development and job creation. Money from either sales tax or property tax revenue can fund improvements such as infrastructure, property improvements or economic developments.

The TIF establishes a base year frozen taxable value. The frozen value is used to compute the taxes for each taxing body. The taxing bodies do not collect the full amount based on the current valuation. The difference between the current valuation and the frozen taxable valuation multiplied by the current tax rate is the amount of taxes funding the TIF.

A common misconception is a TIF increases an individual’s tax bill. This is not true. The tax paid by each taxpayer is the same as if a TIF was not in place. The tax bill notes the amount of tax distributed to each taxing body based on the frozen valuation. The amount of taxes directed to the TIF is the amount noted at the bottom of the bill.

The link below is a tax bill and computation example demonstrating the calculations. The current valuation is 47,847 multiplied by the current tax rate 11.291891% equals a full tax of $5,402.83. The frozen valuation is 39,495 multiplied by the current tax rate 11.291891% equals a frozen tax of $4,459.73. The difference from the full tax amount of $5,402.83 and the frozen tax of $4,459.73 is TIF tax amount of $943.10.

Another way to demonstrate the TIF calculation is below:

Increase in Assessed Value
Tax Year 2020 taxable AV                   47,847
Tax Year 2015 frozen taxable AV       39,495
Increase in AV                                         8,352

TIF Tax Calculation
Increase in AV                                        8,352
2020 Tax Rate                                 11.291891%
Taxes to TIF                                        $943.10

Link to TIF Tax Calculation Example below:

TIF Calculation example Lake Villa

As always, should you have any questions regarding your tax bill please feel free to contact my office