Understanding property tax in Iowa and how it works is vital for all the property owners and investors in the state. Knowing what to pay and when and how to pay helps you stay on top of things and protect yourself from the state's possession laws.
The rate of tax you can expect to pay relies heavily on residential property values in your area. Property produces income for local governments, and failure to pay it could have significant consequences.
One of the main ways the Iowa government generates income is through property tax. The state has one of the highest average tax rates in the country, but your final tax bill will depend significantly on the county you live in and the value of your property.
Many property owners forget about these taxes, especially if they have been paying off a mortgage and have had the taxes taken care of on their behalf. This guide exists to clear up the expectations and processes involved and give people a better idea of what to expect if they are thinking of buying in this state.
Are you a landlord or property manager looking for software to improve your property management accounting and more? Schedule a free demo and see how DoorLoop can help you.
Understanding the Iowa Property Tax Bills and How Things Work
Unlike many states, Iowa does not base property tax rates on a legal bill. Instead, rates are worked out based on property values and the budget requirements of the local authorities in each county. If your property has a high value, you can expect to pay more, since tax is worked out on percentages of the total value.
There are also some counties that set higher rates than others because the property taxes paid play a significant role in their budgetary upkeep. In other words, they have more expenses, so they charge people more taxes to cover their needs.
The Cycle of Property Taxes in Iowa
In Iowa, the property tax cycle lasts 18 months. Assessments begin in January, and final payments are due in the spring of the following year. During that time, tax rates are evaluated and set- with payments dues two times annually.
Here it is in detail.
- January 1st: Assessments begin.
- April 1st: Assessments are completed, and taxpayers are informed.
- April 2nd-25th: This is the period for taxpayers to appeal for a review and modifications to be made (protests and appeals to the Property Assessment Appeal Board can be submitted until April 30th).
- May 1st-31st: Protests are considered.
- June and July: Review submissions and assessment reports are given to the Iowa Department of Revenue Director.
- August and September: Equalization notices are submitted, reviewed, and discussed.
- October 1st: Finalized equalization orders are issued to assessors.
- October: Equalization is implemented.
- November: This is the opportunity for equalization appeals and protests.
- December 1st- February 28th: Local tax budgets are discussed and set.
- March 1st: Taxes are levied by the county board of supervisors.
- July 1st: Authorization is given to the country treasurer to collect taxes.
- September 30th: The first half of the taxes are due.
- March 31st: The final tax bill payments are due.
Who Determines the Property Tax Rate in Iowa?
The Iowa property tax rate is determined in two parts.
First, an assessor determines the value of a property based on classification, which is then reviewed by an auditor for that county. Once the total market value is settled, the taxable value is determined. The percentage of the value that is taxable depends on the type of property and whether or not the property owner qualifies for any credits or exemptions.
Additionally, each county in Iowa has the authority to set its own property tax rate based on budgetary requirements. That is why parts of the state have below-national average rates, and others have some of the highest in the entire country.
When Do You Pay Property Taxes in Iowa?
Iowa property tax is due twice a year on March 1st and September 1st.
In both instances, you are allowed a grace period of one month before late fees apply. So the finally due dates are March 31st and September 30th.
What Happens If You Pay Late?
Penalties begin after April 1st and October 1st if you have not yet paid your property taxes in full. The fee is 1.5% percent of your debt per month.
Until you pay the bills, your property tax is delinquent, meaning you cannot legally sell your property. You must pay the tax before selling.
Also, when your taxes are delinquent, the property is added to the list on the county's annual tax sale. This takes place every year in June.
Other people will have an opportunity to pay the taxes if you haven't done so yourself already, and a lien is then placed on the property. If your taxes remain delinquent and someone pays them in your stead for up to three years, they can claim possession of your property.
The only way to avoid that happening is the pay all owed taxes and interest before the three years are up.
How to Pay Property Taxes in Iowa
There are three ways to pay your property tax: online, in person, or by mail.
To pay online, you must select your county treasurer through the Iowa treasury website and register for a payment plan. You can also pay one off by filling in your details and arranging the payment.
Alternatively, visit your local county treasurer's office to pay the bill directly. You can request an official payment envelope at the office or via the website.
How Much is Property Tax in the State of Iowa?
Iowa property tax rates are determined locally, so your rate can be very different from your friend on the other side of the state.
The overall average tax rate for Iowa as a whole (based on an assessed property value of $500,0000 is 1.5% or $7500, which is significantly higher than the national average of 0.99% or $4950.
That said, the rates in individual counties differ by well over one percent. The lowest property tax rate in Iowa is in Dickinson County (0.97%), and the highest is in Polk County (2.10%).
Median home values across Iowa are nowhere close to the $500,000 mark, so average annual payments tend to hover between $1200 and $2200, with a few exceptions.
Properties in Dallas County and Johnson County are more valuable than most other parts of Iowa, so they pay higher taxes despite having a lower tax rate. Pocahontas County sits at the other end of the scale, with low average property costs and low tax rates. So the average property tax payment is less than $950.
How Are Iowa Property Taxes Determined and Calculated?
There are four primary stages in Iowa property tax calculations.
1: The Property's Value is Established and Reported
First, the actual value (or market value) of a property must be determined. Every country has a local assessor (as do some cities) who is responsible for making and reporting property values.
The Iowa Department of Revenue is only responsible for setting a value for centrally assessed properties such as public utility and railroad properties.
Once the value is established, the assessor reports it to the county auditor.
2: Total Assessed Values are Examined by the Auditor and the Iowa Department of Revenue
After the assessed value reports are passed to the auditor, the department reviews them based on aggregate values by classification, including property type, city, or township. By doing so, they can identify discrepancies in the values given by local assessors and order changes to be made. This is the equalization process.
In simpler terms, assessors submit reports every year, and every second year, auditors compare large numbers of reports to ensure the figures are fair and accurate. If they find that they are not, they can have them changed before property tax rates are set.
Often, a standard rollback amount will be applied for each property classification to adjust all assessed values to allow for inflation.
The next thing to be established is the assessment limitation percentages, meaning the taxable value rather than the actual or market value. This applies to all property types, but the classifications are different. As mentioned above, the 'rollback' amount is determined for each category and used to find the taxable property value.
Industrial and commercial property has the same taxable value as residential and agricultural property for the first $150,000. Above $150,000, the limitation is 90%.
Rates for residential, commercial, agricultural, and industrial property are reassessed annually. Calculations are made to limit the growth of taxable value to 3% each year for the property type in the state as a whole. However, an individual property's taxable value can rise by more than that from year to year.
3: Local Budget Needs and Tax Rates are Assessed and Applied
Iowa property tax rates are different in every county because each has its own local authorities that can decide how tax dollars are used, and how many are needed. It is up to these authorities (determined by Iowa statutes) to set their budgets and figure out their needs.
From there, they suggest tax rates for commercial and residential properties in their area. Once the budget and rates are approved, they are sent to the county auditor. The county auditor's calculations are based on those submitted budgets and the aggregate taxable value to determine the property taxes levied on the property owner.
Next, the county treasurer receives authorization to apply a final tax rate.
4: Any Relevant Credits are Taken Off the Total
Once property values are determined and the property tax rate is set, all that remains is to deduct any applicable credits from individual property owners' bills.
Some examples of credits that can reduce the property tax owed include:
- Agricultural land tax credit
- Homestead credit
- Low-income tax credit
- Family farm tax credit
- Additional property tax credit
Example of a Property Tax Calculation in Iowa
Here is an example of what a tax calculation may look like for residential property owners in Iowa if they do not qualify for any credits.
- Take the market value of the property. Let's say a property is assessed and valued at $200,000.
- Apply the rollback rate determined by the county auditor. The assessment limitation calculation for this category is (for the sake of this example) 0.55.
- Calculate the taxable property value. $200,000 x 0.55 is $110,000- a.k.a. the taxable value of the property.
- Apply your district's tax rate. This value is then multiplied by the tax levy set by your district. Let's use 1.5% for this example.
- Find the tax owed. Your property tax would be $110,000 x 1.5%, which equals $1650.
If you do qualify for tax credits, this would be calculated between steps three and four. Once you have the taxable value, subtract the credit amount before applying the tax levy.
To give an example, if the taxable value is $110,000 and you qualify for Homestead credit of $4850, the net taxable value becomes $105,150. After applying the levy of your tax district (1.5% for the sake of our example), your property taxes would total $1577.25.
How to Lower Property Taxes in Iowa
There are a few discounts and tax relief initiatives in Iowa that may reduce the costs of some property owners' bills.
Iowa Code Section 25B.7 refers to several credits, funding options, and property tax supports that people can apply for to reduce their costs. Here are some examples.
Iowa Code Section 425.16
Tax relief is available for totally disabled property owners and those over the age of 65, provided their household income is below the current limits set by the State of Iowa. You can apply through your neighborhood community center or treasurer's office between January 1st and June 1st each year.
Iowa Code Section 426A
A discount of $6.92 per $1000 is given to those who have partaken in military service. There is also an increased tax exemption of $4000 off of the taxable value for those who qualify beginning on July 1st, 2024.
Iowa Code Sections 425.1 to 425.15
Homestead credit and exemptions can reduce the non-taxable value of a person's property depending on their age, income, and status. An exemption can be as much as $6500, which can make a big difference to the total payment requirement of a property assessed that year.
Important Things for Property Investors in Iowa to Know
If you disagree with the findings of property tax assessments, you can complain to the local review board and ask for an appeal. You can find the form through the Iowa Department of Revenue website or your local assessor.
In case you disagree with the outcome of the review, you can then take it up with the Property Assessment Appeal Board.
Remember that Iowa real estate taxes are always a year behind, meaning the bills coming through this year were for last year's value assessment.
This means that, sometimes, you may be billed for a property you just acquired. This should be handled during the purchase transaction, with the seller handling the fees or the buyer being given credit on the purchase price.
Some property owners who are still making mortgage payments may not be responsible for paying their own property taxes, as this is generally covered in the amount taken by the mortgage lenders. When the mortgage is paid in full, you then receive the full responsibility to pay your taxes on time.
Property taxes in Iowa may feel complicated, but they are something everyone must deal with to protect their investments and stay on the right side of the law. Unless you want to appeal your property's valuation, all you need to remember is to pay the bills on time.
Remember, you can pay them any time after receiving the bill from the county treasurer until September 1st (for the first half) and March 1st for the second half. There is a one-month grace period, but it is best practice to have things paid in advance to avoid penalties and the risk of liens on your property debts.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.