Property Tax Primer

In Iowa, real property taxation is a complex system involving multiple layers of assessment, classification, and legislative oversight. Here's a breakdown of how it works across different property types, followed by a summary of the significant reform efforts undertaken during the 2025 legislative session.

Current Real Property Taxation in Iowa

1. Property Classification and Assessment

Iowa classifies real property into five main categories:

  • Residential
  • Commercial
  • Industrial
  • Agricultural
  • Utilities/Railroad

Each class is assessed differently:

  • Residential, Commercial, and Industrial properties are assessed at market value.
  • Agricultural property is assessed based on productivity and earning capacity, not market value 
  • Utilities and Railroads are assessed annually by the state.

Assessments occur every odd-numbered year, except for utilities and railroads which are assessed annually.

2. Valuation and Rollbacks

After assessment, the taxable value is determined by applying assessment limitations (commonly referred to as "rollbacks"):

  • Residential property has a statewide growth limit of 3% on aggregate taxable value.
  • Commercial and Industrial properties are taxed at the same rate as residential for the first $150,000 of value, and at 90% for the remainder.
  • Agricultural land is not subject to market-based rollbacks but has its own levy rate.

3. Levy Rates and Tax Calculation

Local taxing authorities (cities, counties, school districts, etc.) set budgets, which are used to determine levy rates. These rates are applied to the taxable value to calculate the final tax bill. The county auditor calculates the levy rates, and the county treasurer collects the taxes.

2025 Legislative Session: Property Tax Reform Efforts

In 2025, Iowa lawmakers initiated a major overhaul of the property tax system, the most significant since the 1970s. Key bills included House Study Bill 313 and Senate Study Bill 1208

Major Proposed Changes

  • Elimination of the Rollback System:
    • The rollback system would be phased out over 10 years.
    • Residential property would retain a cap: taxable value limited to 75% of assessed value
  • Homestead Tax Credit Expansion:
    • A new 25% discount on taxable value up to $125,000 for qualifying homesteads
  • Revenue-Restricted System:
    • Shift from rollback to a system that caps levy increases at 2% annually, with exceptions for inflation
  • State Assumption of School Funding:
    • The state would take over $426 million in school funding previously covered by property taxes
  • Impact on Tax Increment Financing (TIF):
    • Concerns were raised that reforms could disincentivize development by limiting future revenue from TIF districts

Legislative Intent and Debate

  • The reforms aim to reduce Iowa’s high property tax burden, which ranks 11th nationally
  • Lawmakers are balancing taxpayer relief with the need to preserve local government services
  • The reform process is deliberate and ongoing, with bipartisan input and public hearings planned throughout the year