AN INTRODUCTION TO IOWA PROPERTY TAX
The final tax rate is the result of budgets established to provide services by jurisdictions (cities, school districts, counties, etc.), an assessor’s assessment, a county auditor’s calculations, and laws administered by the Iowa Department of Revenue. Property taxes are not determined by a single individual who assesses your property and sends you a bill.
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.
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. Typical improvements include a building, house or mobile home, fences, and paving.
The following six classes of real property are evaluated:
- Utilities/railroad [This class is assessed at the state level.]
The primary recipients of property taxes levied include:
- K-12 Schools
- Merged Area Schools
- Townships, and
- Agricultural Extension Districts
Current details on property taxes paid and levied is available on the Website of the Iowa Department of Management, https://dom.iowa.gov/
How often is property assessed?
All real property is 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.
Who collects property taxes?
Property Taxes are billed and collected by county government. County Treasurers collect tax revenues and then distribute or allocate the dollars to local authorities. 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 have authority to levy taxes.
Iowa has more than 2,000 taxing authorities. Most property is taxed by more than one taxing authority.
How are property taxes determined?
- The value of 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.
- 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.
- The Department examines total assessed values and equalizes them. Each assessor sends the reports, called “abstracts,” 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 to ensure that property values are comparable among jurisdictions and complies with Iowa code.
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.
- Budgets are established. Each taxing authority determines its own 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.
- 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.
- Credits are subtracted. Credits such as the Homestead Credit are subtracted before a final tax bill is sent to the taxpayer.
Equalization and Rollbacks
Before you ever see your tax bill, two additional steps occur to test and adjust assessments to legal levels.
In Step 3 above, the Iowa Department of Revenue is responsible for “equalizing” assessments every two years. A general explanation of the purpose of equalization follows: The Department of Revenue compares the assessors’ abstracts to a “sales assessment ratio study” completed independently of the assessors. If the assessment (by property class) is 5% or more above or below the median ration of the sales ratio study, the Department of Revenue increases or decreases the assessment to reach 100% of actual value. There are no sales ratio studies for agricultural and industrial property.
Equalization occurs on an entire class of property, not on an individual property. Equalization is applied based on an assessing jurisdiction, not on a statewide basis.
Equalization helps maintain equitable assessments among classes of property and among assessing jurisdictions. This contributes to more equitable distribution of state aid, including aid to schools. It also helps to equally distribute the total tax burden within the jurisdiction.
More than 20 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 property 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%. Rollback for Res 3+ (formally multi-residential) property is:
- 25% for the 2015 Assessment
- 5% for the 2016 Assessment
- 75% for the 2017 Assessment
- 75% for the 2018 Assessment
- 25% for the 2019 Assessment
- 25% for the 2020 Assessment
- 75% for the 2021 Assessment
- equal to the residential rollback for the 2022 Assessment
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.
Iowa Property Tax Assessment Cycle
The cycle required each time property is assessed is outlined below.
- January 1 Assessment date.
- April 1 Assessors complete assessments and notify taxpayers.
- April 2 – 25 Taxpayers may request informal review of assessment by assessor.
- On or before April 25 Following informal review, Assessor may enter into a signed written agreement with the property owner or aggrieved taxpayer authorizing the assessor to correct or modify the assessment according to the agreement of the parties.
- April 2 – 30 Taxpayers may appeal assessments to local boards of review.
- May 1 – May 31 Local boards of review consider appeals. This time may be extended to July 15 by the Iowa Department of Revenue Director.
- June 15 Local boards of review submit reports to the Director.
- July 1 Assessors submit abstracts of the assessments to the Director.
- August 15 The Department issues tentative equalization notices to assessors.
- September The Department holds equalization hearings, which are held for public input.
- October 1 The Department issues final equalization orders to county auditors.
- October 2 – 12 Assessing jurisdictions may apply for alternative methods of implementing equalization orders.
- By October 8 The county auditor must publish notice of the final equalization order by this date, and must provide notice by mail to the taxpayers if the equalization order results in an increase in valuation.
- October 9 – 31 Taxpayers may protest the final equalization order to local boards of review.
- October 10 – November 15 Local boards of review meet to hear equalization protests.
- November 1 The Director certifies assessment limitation percentages to county auditors.
- November 15 Local boards of review submit a report about the equalization protests to the Department.
- 1 – Feb. 28 The taxing authorities adopt the budgets based on the valuations.
- March 1 The county board of supervisors levies the taxes.
- July 1 The county treasurer receives authorization to collect taxes.
- September 30 First half of taxes are due.
- March 31 Second half of taxes are due.
What causes property taxes to increase?
Basically, three variables must interact to decrease or increase your property taxes:
- The combined budgets of the taxing authorities
- The total value of all the property in the taxing unit
- The taxable value of your property
Your taxes increase if…
- The budgets increase and the taxable value of all properties remain the same.
- The budgets and taxable value of property in the entire government unit remain the same but the taxable value of the individual’s property increases.
- The budgets and taxable 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…
- The budgets decrease and the taxable values of all properties remain the same.
- The budgets and taxable value of property in the entire government unit remain the same but the taxable value of the individual’s property decreases.
- The budgets and taxable value of the individual’s property remain the same but the taxable value of the property in the entire government unit increases.
Why might you pay higher taxes than your neighbor?
Assessed value of a house depends on land size, square footage, type of construction, age, quality, location, story height, and condition, as well as other factors. Your assessed value is one component of the property tax burden. Other components include the levy rates for the various levy authorities including city, township, county, school district, and other levying authorities. You may also be a different classification than your neighbor, as different classes have a different rollback applied to them. These differences all contribute to different tax burdens.
Credits and exemptions such as Homestead, Ag Land, and Military would also make a difference in the overall tax burden.
I disagree with my assessed value
Property owners who disagree with the assessor’s estimate of the market value of their property should ask themselves, “Could I sell this property for that amount today?” If the answer is yes, then the value is probably correct. However, every property owner has the right to appeal an assessment.
Property owners or aggrieved taxpayers may contact their assessor and request an informal review of the assessment. Following this review the assessor may recommend the property owner file a protest with the local board or review, or may enter into a signed written agreement with the property owner authorizing the assessor to correct or modify the assessment according to the agreement of the parties.
You may appeal your initial assessments to your local board of review by filing a written protest between April 2 and April 30 of each year. Boards of review meet annually in May to consider the protests.
In a reassessment year a property owner may protest an assessment for one or more of the following reasons:
- The assessment is not comparable to others with similar properties.
- The property is assessed at more than its actual value.
- The property is exempt from taxation.
- There is an error in the assessment.
- The assessment is fraudulent.
A property owner or aggrieved taxpayer may appeal the protest to the Property Assessment Appeal Board, if not satisfied with the board of review’s decision. If dissatisfied with a property assessment appeal board decision, the decision may then be appealed to district court. In the alternative, property owners or aggrieved taxpayer may still file appeals directly with the district court and forego filing with the property assessment appeal board. Contact your assessor’s office for more information.