PROPERTY TAXES IN IOWA
Property taxes are not determined by a single individual who assesses your property and sends you a bill. The final tax rate is the result of budgets established to provide services, an assessor's assessment, a county auditor's calculations, and laws administered by the Iowa Department of Revenue.
Because property assessment involves a series of events that takes 18 months from start to finish, this information will not be able to answer all your questions. It should, however, be able to explain the basic principles and events involved in calculating the property tax rate.
The Iowa County- Property Tax Overview
What is Iowa property tax?
The Iowa property tax is primarily a tax on "real property," which is mostly land, buildings, structures, and other improvements that are constructed on or in the land, attached to the land, or placed upon a foundation.
The following five classes of real property are evaluated:
• Utilities/railroad [This class is assessed at the state level.]
How often is property assessed?
All real property is re-assessed every two years in odd-numbered years. Centrally assessed properties including railroads and public utilities are assessed every year by the Iowa Department of Revenue. Valuations are as of January 1st but one does not start paying taxes until eighteen months later. For example, 2022 valuations are payable Fall 2023, Spring 2024.
Which governments collect property taxes?
Property tax supports many different "taxing authorities." Cities, counties, school districts, and townships are the most common. Taxing authorities may also include community college districts, agricultural extension districts, assessor offices, hospital districts, and sanitation districts. In addition, there are associations for fire protection, drainage, and other public needs that levy taxes. Most property is taxed by more than one taxing authority.
How are property taxes determined?
1. The value of a property is established.
The assessor (or the Iowa Department of Revenue) estimates the value of each property. This is called the "assessed value." The assessed value is to be at actual or market value for most property taxes, see the “Valuations” tab for additional information.
2. The assessments of all taxable properties are added together.
The assessor totals the assessed value in each classification and reports it to the county auditor thru the “abstract”.
3. The Department examines total assessed values and equalizes them.
The assessor also sends the "abstract," to the Iowa Department of Revenue. The abstract shows the total values of all real property in each jurisdiction by classification of property, not by individual property.
A process called "equalization" is applied every two years, if needed, to ensure that property values are comparable among jurisdictions and comply with the Iowa code. (See Valuations for additional information about equalization)
In addition, the "assessment limitation" is applied every year by the auditor. This process is commonly called "rollback" and is used in response to inflation. The application of the rollback results in taxable value in most cases.
More than 40 years ago, residential property values were rising quickly. To help cushion the impact of high inflation, the Legislature passed an assessment limitation law called rollback.
Increases in assessed values for residential and agricultural properties are subject to this assessment limitation formula. If the statewide increase in values of homes and farms exceeds 3% due to revaluation, their values are "rolled back" so that the total increase in aggregate value statewide is 3%. Rollback for industrial and commercial property is 90%.
The rollback for multi-residential properties has decreased 3.75% each year since 2015. In 2022, HF218 changed Multi-Residential class to Residential for 2022 valuations and will have the same rollback moving forward.
Rollback for agricultural and residential property is allowed to fluctuate within the 3% limitation. This does not mean that the assessment on your home will increase by only 3%. The rollback is applied on a class of property, not an individual property. It means that the statewide total taxable value can increase by only 3% due to revaluation.
For more historical information see Rollbacks Historical Chart:
4. Budgets are established
Each taxing authority determines its budget. The budget includes the cost of providing services, the amount of aid received from the federal and state governments, the amount of money remaining from previous years, and revenue from other charges for services.
Each approved budget is submitted to the county auditor.
5. A tax rate is established
The county auditor divides the amount of the budget that is not funded by other sources by the taxable value of all the property in the taxing district.
The result is referred to as "dollars per thousand." For example, If the dollars per thousand were $10, the tax on a home valued at $50,000 would be calculated at $10 x 50. The tax on that home would be $500 for that single taxing authority.
The rates for all authorities are added together, resulting in a single tax levy called a consolidated levy for each unique set of taxing districts. The consolidated levy rate is always the result of two or more tax rates established by different government entities.
6. Credits are subtracted
Credits such as the Homestead Credit are subtracted before a final tax bill is sent to the taxpayer. See “Tax Credits & Exemptions” for addition information.
$100,000 - Assessed Value (Residential)
x 0.541302 - Rollback (changes yearly)
= $54,130 - Taxable Value
x 0.03315773 - levy $33.15733 per thousand (varies with taxing district)
= $1,795 Gross Taxes
-$160 Homestead Credit ($4,850 x .03315733 levy rate for property)
= $1,635 Property Taxes (rounded)
A property tax estimator is located on the Beacon website.
What causes taxes to increase?
Three variables must interact to decrease or increase your property taxes:
o The value of your property
o The total value of all the property in the taxing unit, rollback
o The combined budgets of the taxing authorities, levy rate.
Your taxes increase if...
o The budgets increase and the value of all properties remain the same.
o The budgets and value of property in the entire government unit remain the same but the value of the individual's property increases.
o The budgets and value of the individual's property remain the same but the value of the property in the entire government unit decreases.
Your taxes decrease if...
o The budgets decrease and the values of all properties remain the same.
o The budgets and value of property in the entire government unit remain the same but the value of the individual's property decreases
o The budgets and value of the individual's property remain the same but the value of the property in the entire government unit increases
Why might you pay higher taxes than your neighbor?
The value of a house depends on land size, square footage, type of construction, age, quality, location, story height, and condition, but that's not all. Your neighbor's property may be taxed by different taxing districts than you are. For instance, districts are often divided by highways. If your neighbor's property is across the highway, it may be taxed by different districts than you are.
Also, credits and exemptions such as Homestead, Ag Land, and Military could make a difference.
If you disagree with the assessed value of your property see How to Protest the Value of your Property.
PROPERTY TAXES IN IOWA