Illinois Property Tax Reforms Signed into Law to Protect Homeowner Equity

Illinois Governor JB Pritzker has signed into law landmark legislation aimed at protecting homeowners from losing their equity through property tax foreclosure. The bill, a priority for Cook County Treasurer Maria Pappas, represents a significant overhaul of the state's property tax foreclosure system.

The new law aligns Illinois with a 2023 U.S. Supreme Court ruling that states can only retain the amount due in delinquent taxes, penalties, and fees from foreclosure sales. Previously, Illinois property owners who fell behind on taxes could lose their homes and any accumulated equity, with tax lien investors potentially keeping the entire sale proceeds even if the tax debt was a small fraction of the property's value.

Under the reformed system, any surplus equity remaining after the tax debt, interest, and fees are satisfied will be returned to the former property owner. Pappas stated the legislation "restores fairness" by ensuring governments collect only what is legally owed.

The law establishes a tax-deed auction system, with proceeds first covering taxes, interest, and fees, and any remaining equity returned to the owner. Cook County will also transition away from private tax buyers by 2030, a move expected to provide struggling homeowners more opportunities to arrange payment plans with the county before their properties are auctioned.

This reform is anticipated to better protect neighborhoods and homeowners by preserving equity, increasing transparency, and promoting a more equitable property tax collection system that keeps more owners on the tax rolls.