It’s an odd-numbered year in Iowa, which means new property valuations have been sent to property owners. I've been receiving a lot of phone calls regarding these assessments, so let’s break down how the property tax system works.
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How the Property Tax System Works in Iowa
This is a simplified overview, and I encourage you to conduct your own research to better understand this complex system.
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County Assessor and Property Values
The County Assessor is responsible for determining the market value of your property. Properties are categorized into three main types: Agricultural, Commercial, and Residential. By state law, the assessed value must reflect 100% of the market value.
To ensure accuracy, the State Department of Revenue reviews the County Assessor’s work annually. When a property is sold, the seller completes a Declaration of Value form, which is sent to the state for review. At the end of the year, the total actual sale prices are compared to the total assessed values of those sold properties. The acceptable ratio range is 95% to 105%.
If the sale price assessments fall within this range, no adjustments are required. However, if the ratio is outside the range—say, at 106%—the state issues an Equalization Order, requiring the County Assessor to adjust property assessments accordingly. This process helps maintain fairness but can be unpopular among property owners, especially when assessments increase significantly.
It’s important to note that while countywide valuations may be accurate on average, individual properties may be incorrectly assessed due to the mass appraisal methods used. If you believe your assessment is incorrect, you have the right to protest through either an informal review or a formal review before the County Board of Review. However, keep in mind that this process concerns property valuation, not property taxes—the Assessor’s office does not handle tax discussions.
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Iowa Property Tax Rollback Adjustments
The State of Iowa sets rollback percentages each year to control taxable property value increases. This determines what percentage of a property’s assessed value will be taxed. For example, in fiscal year 2024, the residential rollback was 56.49%, meaning a home assessed at $100,000 would be taxed on $56,490 of its value.
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Property Tax Exemptions
Certain exemptions can reduce the taxable value of a property. Two of the most common are:
Check with your local County Assessor’s Office to see if you qualify for these or other exemptions.
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How Budgets Affect Property Taxes
Three main entities determine property tax rates:
Each submits a budget, and the County Auditor calculates how much revenue must be collected through property taxes to meet those budgets. This results in a levy rate, expressed in dollars per $1,000 of taxable value.
For example, if your property’s taxable value is $56,490 and the levy rate is 40.61582, your total tax obligation would be $2,294. The County Treasurer is responsible for collecting these taxes.
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Jon’s Pet Peeves About Property Taxes
One of my biggest concerns is that Iowa homeowners never truly own their property. Even if you’ve paid off your mortgage after 30 years, failing to pay property taxes can result in the county selling your property out from under you. Worse, if you owe $20,000 in taxes and your property sells for $200,000, the county keeps the entire amount—leaving you with nothing.
Additionally, property taxes can increase significantly over time. Even if your mortgage payment is fixed, rising tax rates can make your home unaffordable.
Another frustration is how misleading levy rate reductions can be. A taxing entity, such as a school district, may claim they are lowering the levy rate by 5 cents. However, if your property value increases, you could still end up paying more in taxes.
Why should property value determine tax obligations? Are government services more expensive for owners of higher-value properties? The current system penalizes property owners for making improvements, discouraging investment in neighborhoods. Imagine if homeowners could renovate their properties without worrying about tax hikes—our communities would thrive!
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Common Misconceptions About Property Taxes
Renters Don’t Pay Property Taxes
Yes, they do—indirectly. Landlords must account for all expenses, including property taxes, in their rental pricing. If taxes increase, landlords adjust rent accordingly. In other words, renters are helping to pay property taxes through their monthly payments.
Commercial Property Taxes Don’t Affect Me
They absolutely do. Businesses must cover their expenses, including property taxes, in the prices of their goods and services. When property taxes rise, the cost of products and services also increases.
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Resources for Further Reading
If you’d like to dive deeper into Iowa’s property tax system, here are some helpful links:
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I hope this guide helps you better understand Iowa’s property tax system. If you have questions or need assistance with your property valuation, don’t hesitate to reach out!
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Norwalk IA Real Estate – Jon Niemeyer, Broker Associate/REALTOR® at EXIT Realty and Associates. 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.
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