Understanding the Basics of Iowa Property Tax: Part 1

For most property owners in Iowa, March is the month when we pay the second-half of our annual property tax. The first-half was due in September of last year. If you have a mortgage on your property, you may have elected to have the mortgage servicer collect a twelfth of your annual property tax amount with each monthly mortgage payment and they will pay your property tax when it is due, but it is ultimately the responsibility of the property owner to make sure the taxes have been paid. 

Paying your property tax on time is very important, because failure to do so can lead to a tax lien on your property and even a loss of title to your property through a tax sale. In the event that your property has been sold at a tax sale, there is a redemption period that allows you to pay the previously unpaid taxes, certain fees, and interest to get the property back, but this is expensive, and if you miss the redemption period, you have lost your ability to get it back at all.  

Property taxes are used to partially fund the three main local taxing entities: city or township, school, and county, but there can be more. Each of these taxing entities determines a levy amount that property owners will be taxed on for every $1,000 of taxable value of the property owned. The Iowa Department of Management website is a great resource for tax levy information across the state.  

Many people are surprised to learn that they owe more property taxes when they sell their property. Each payment made is for a period of time about a year in the past. The first-half payment made in September pays for the period beginning July 1 through December 31 of the previous year. The second-half payment made in March is for the period beginning on January 1 through June 30 of the previous year. This means there is always approximately 9 to 14 months of unpaid property taxes when the property sells. The way we work around that is we prorate the property taxes for however many months and days from when the taxes are paid through until the day of the closing. The seller then credits that amount to the buyer in the sale price, which reduces the proceeds to the seller.  

I hope you enjoyed part 1 of my deep dive into property taxes. Make sure to see part 2 in next week’s newsletter. 

Norwalk IA Real Estate – Jon Niemeyer, Broker/Owner/REALTOR® at EXIT Realty North Star. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call Jon Niemeyer at 515-490-4675.