I continue to read articles and hear statements made at several trade group meetings regarding the so-called lost year of property tax relief. At the risk of beating a dead horse, I will attempt to once again explain the facts of LB34 and hopefully answer some of the questions people still have regarding this issue.

Prior to the passage of LB34, the State was providing property tax relief through an income tax rebate, which had been in place for several years and grew to 30% of the amount paid by property taxpayers for their public school and community college real estate taxes. Individuals were required to claim the income tax rebate when income taxes were filed the year after the real estate taxes were paid. In many cases, taxpayers who did not avail themselves of a professional tax preparer failed to claim the income tax rebate. Others did not claim it because the amount was too small, or they did not want to go through the process of looking up the legal descriptions of their land to complete the necessary claim form to be filed with their income tax return.

For example, if you paid your 2022 property taxes prior to December 31, 2022, you could have claimed the income tax rebate when you filed your 2022 income tax return by April 15, 2023. If, however, you paid the 2022 property taxes in 2023, which is common for most property taxpayers, you could not have claimed your income tax rebate until you filed your 2023 income taxes in 2024.

If you paid your 2023 property taxes by December 31, 2023, you were able to claim your income tax rebate when you filed your 2023 income tax return in the spring of 2024.

During the special session in 2024, the legislature passed LB34, which capped property tax increases by cities and counties and converted the income tax rebate to a property tax credit. There were two steps to the conversion of the property tax relief. First, the income tax rebate ended effective January 1, 2024, meaning that no property taxes paid in 2024 will be eligible for the income tax rebate.

Second, the Legislature added funds to provide for a property tax credit. Everyone by now should have received their 2024 property tax statements. You will note that, in addition to the legacy property tax credit known as the “Tier I Tax Credit,” there is a new property tax credit that was created by LB34. This property tax credit should approximate what would have been your 2023 income tax rebate (associated with only your public school property tax). The benefit of this change is it eliminates the need to apply for the rebate, thus allowing all property taxpayers to receive the credit. The property tax relief is applied in the year the taxes are assessed. This change is important because those homeowners who escrow their real estate taxes will get their escrows recalculated in the first quarter and see their house payments go down in the first quarter of 2025. Had the income tax rebate still been in place, they would not have received the property tax relief associated with their 2023 property taxes until mid-year 2025.

If someone tells you that your property taxes went up, I would ask them to look at their 2024 property tax statement.

So, what about the so-called lost year? To the extent there is a gap, it is merely due to the timing of income tax filings versus property tax payments. For those who pay their property taxes in the year after the tax is assessed instead of in the same year the property tax is assessed (e.g., paying 2024 property taxes in 2025), your relief will be “delayed” because of when you pay your property taxes. But that doesn’t mean you miss out on a year of relief. If you are paying your real estate taxes a year in arrears, you will need to pay your real estate taxes current before selling your property. You will have the benefit of the property tax credit at that time.

For those thinking there is something that needs to be “fixed” next year, they need to look no further than State expenditures for property tax relief.

Under both the income tax rebate and the property tax credit scheme, the State foots the bill for property tax relief. The State paid $560 million last year to reimburse taxpayers through the income tax rebate. This year, the State will pay $760 million in property tax credit reimbursements to counties in order to make the political subdivisions whole since the property taxpayers pay less (not more). If there was truly a lost year, the State would have a corresponding gap in its expenditures for property tax relief. It does not.

I look forward to continuing to hear from you about issues that are important to you. It is a privilege to serve as your State Senator, and I will continue to give my full effort to make a positive difference for the District and the State. You can reach me at mjacobson@leg.ne.gov or 402-471-2729.