First, I have to say that property taxes are local taxes. These taxes are what you pay to support local police, fire, roads, schools, hospitals, and all other local services and programs that you want. The State does not receive property taxes or vote on them, whatsoever. The State does have a role in ensuring that property taxes are being used properly and effectively. If you voted to fund a new school, then your property taxes are going up to pay for that school, that is the reality.
By now you have (probably) paid your property taxes for the year. That payment was for the assessment that was done in 2021 because property taxes are paid in arrears. For the purposes of this article, we are focusing on residential assessments and property classes (various classes of property are assessed differently and by different entities.)
Let’s start with how and when our homes are assessed. Iowa law requires that all residential property be reassessed every two years on the odd numbered year by the county assessor. So, all of us should have gotten an updated home reassessment in the mailbox. From what I understand there are a lot of people upset with the increase in the assessed value of your home.
When we talk about assessing a home—we are really talking about figuring out the market value. The law in Iowa is that assessed value is market value. The assessor finds the market value by analyzing recent sales but will also look at the replacement cost (the amount it would cost to rebuild the property) less depreciation. The assessed value should be as close to market value as possible.
After considering all relevant information, assessments are sent out to homeowners by April 1 of the assessment year. You will not actually pay the taxes on these assessments until September of the following year. If you disagree with the assessment you receive—there is a process for you to argue your case. In a reassessment year, a property owner may protest an assessment for one or more of the following reasons:
• The assessment is not comparable to others with similar properties.
• The property is assessed at more than its actual value.
• The property is exempt from taxation.
• There is an error in the assessment.
• The assessment is fraudulent.
Protest forms can be received in your assessor’s office starting April 2nd up to and including April 30th. The Board of Review will then review your assessment and determine whether the assessed value is fair. If, after review, you still do not agree with the assessed value, you may choose to appeal the case by filing in district court or with the Property Assessment Appeal Board at the Department of Revenue.
Where Do They Come Up With My Property Tax Bill?
This will start with the assumption that your assessed value is set (including any equalization orders figured in) and we just need to understand the property tax bill. Did you know your assessed value is NOT your taxable value? The various taxing jurisdictions apply tax rates to your taxable value, not your assessed value. Your assessed value is just the market value of your home. So, what is the taxable value? Basically, your taxable value is the part of your assessed value that is taxable. Just like not all your income is taxable—not all your house is taxable!
In Iowa increases in assessed values for residential and agricultural property are subject to an assessment limitation formula. This does exactly what it is called—it limits the amount your property assessment (and therefore taxes) can increase year over year.
If the statewide increase in values of homes and farms, classified as residential or agricultural properties, exceeds 3 percent, the values of those properties are limited so that the total increase in aggregate value statewide is 3 percent. Iowa does not limit your individual property from increasing in assessed value by more than 3 percent—it does that for the entire class of property. Some will increase more than 3 percent, and some will decrease. But overall, the increase will be 3 percent or less.
So how do we reconcile that your assessed value went up by 20 percent?
The Department of Revenue calculates a rollback rate. The Department will figure out how much of your assessed value should be taxed to not violate the 3 percent assessment limitation. The 2022 rollbacks are:
This represents the percentage of your assessed value will actually be taxed (will have the tax rates applied to it). The main reason Iowa does this is to keep Iowan’s property taxes as predictable and stable as possible. It does not solve all the issues—but it strikes the balance between wanting to give property owners some predictability without locking assessments on an individual property basis and forcing local governments to live in constant unpredictability.