2020 property tax credits will decline from previous year

Nebraska’s $275 million property tax credit program is expected to be worth a little less to property owners when they pay their 2020 tax bills.

The Nebraska Department of Revenue has released its annual calculation for how much credit taxpayers will receive from the state’s current property tax relief program.

For the 2020 tax year, non-ag land property owners will receive $102.21 in credit for every $100,000 of their property’s valuation.

Ag land property owners will receive $122.64 in credit for every $100,000.

While the credit amount is still greater than most previous years since the program began in 2007, this is a slight reduction from last year, when the credit covered $104.15 for most taxpayers and $124.98 for ag taxpayers.

The property tax credit represents the amount of your local property tax bill the state pays with your state income and sales tax dollars. The credit does not actually reduce how much tax your local governments levy.

If local property taxes rise faster than the funding the state allocates to the credit, then your property tax credit will shrink.

Last year, more than $245 billion in Nebraska real estate was eligible for the credit. This year, that value has risen to $251 billion.

With the state’s fund for the property tax relief program currently remaining at $275 million, the same amount of credit must be used to cover the increased valuation.

Non-ag land property owners made a roughly 60-40 split of the property tax credit fund with owners of ag land. Ag’s share of the credit, at $107 million, fell from the previous year, when farmland received $116 million in credits.

These numbers do not include the new $125 million Property Tax Incentive that the Legislature approved this year. Property owners will claim an income tax credit for that program when filing their state income taxes.

The Property Tax Credit is distributed based on the valuation of property, while the Property Tax Incentive is based on the amount of school property taxes paid. Neither program reduces or limits local property taxes.

The bill that introduced the Property Tax Incentive, LB1107, also prohibits the state from reducing its annual commitment to the current property tax credit fund.

The $275 million will be added to the state budget going forward unless lawmakers pass legislation to change that requirement.

One way the fund could be increased is through a current requirement that new revenues for the property tax credit must be used to increase the total funding available.

For example, if voters approve a forthcoming casino gambling ballot initiative, current law requires that revenues dedicated for the fund cannot be used to replace the current sources of funding for the credit, it must result in an increase in the required floor of support for the property tax relief program.