Calculating Property Taxes
The process of determining the amount of your tax bill is a complicated process which requires the work of several local and state agencies to complete. Included below is a summary of how property taxes are determined as well as a few examples of property tax calculations.
How are Property Taxes Determined?
- The value of property is established
The assessor 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 Iowa Department of Revenue 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.
How do I estimate the net tax for a residential property?
Example 1 - without Tax Credits:
|
Step-by-Step Instructions |
Calculation |
|
1. Enter your 2018 assessed value |
$100,000 |
|
2. Enter the rollback 1 |
x 0.569180 |
|
3. Multiply line 1 by line 2 |
$56,920 |
|
4. Enter the tax levy for your tax district 2 |
x 0.04721727 |
|
5. Multiply line 3 by line 4 |
$2,688 |
How do I estimate the net tax for a residential property with Homestead Tax Credit?
Homestead Credit
The Homestead Credit is available to residential property owners that own and occupy their property as their primary residence. The credit is a reduction in the amount of property tax owed; it is not a refund.
To qualify for the credit, the property owner must be a resident of Iowa and actually live in the property on July 1 and for at least six months of every year. There are some exceptions for people in the military and nursing homes who may otherwise qualify.
Sign-up for the credit is at the assessor’s office by July 1 of the year the credit is first claimed. Once a person qualifies, the credit continues until the property is sold or until the owner no longer qualifies.
Example 2 - with Homestead Tax Credit:
|
Step-by-Step Instructions |
Calculation |
|
1. Enter your 2018 assessed value |
$100,000 |
|
2. Enter the rollback 1 |
x 0.569180 |
|
3. Multiply line 1 by line 2 |
$56,920 |
|
4. Subtract Homestead Credit 4 |
- $4,850 |
|
5. Equals your Net Taxable Value |
$52,070 |
|
6. Enter the tax levy for your tax district 2 |
x 0.04721727 |
|
7. Multiply line 5 by line 6 |
$2,458 |
How do I estimate the net tax for a residential property with Homestead and Military Tax Credit?
Military Tax Credit
The Military Tax Credit is an exemption intended to provide tax relief to military veterans who (1) served on active duty and were honorably discharged or (2) members of reserve forces or Iowa National Guard who served at least 20 years qualify for this exemption. The veteran must apply with the local assessor. Once accepted, the exemption is ongoing.
Example 3 - with Homestead and Military Tax Credit:
|
Step-by-Step Instructions |
Calculation |
|
1. Enter your 2018 assessed value |
$100,000 |
|
2. Enter the rollback 1 |
x 0.569180 |
|
3. Multiply line 1 by line 2 |
$56,920 |
|
4. Subtract Military Credit 3 |
- $1,852 |
|
5. Subtract Homestead Credit 4 |
- $4,850 |
|
6. Equals your Net Taxable Value |
$50,218 |
|
7. Enter the tax levy for your tax district 2 |
x 0.04721727 |
|
8. Multiply line 6 by line 7 |
$2,372 |
Additional Information:
Notes
1 2018 State of Iowa Rollback - Residential Class - gross taxable value is rounded to the nearest $10.
2 Tax levy is per thousand dollars of value and varies with each taxing district. The example above was a Polk County parcel and the tax levy rates by taxing district for Polk County can be found at Polk County Tax Levies. For the tax levy for all other counties, contact your County Treasurer.
3 Military Credit - Enter $1,852 for any war or military action after WWI.
4 Reduces Taxable Value by $4,850 pursuant to Iowa Code Section 425.1. This reduction in the amount of credits and exemptions will occur when the amount of funding received from the State for the credits and exemptions is less than the calculated amount of credits and exemptions for each applicable taxable property.
Revision Date: July 29, 2019