DES MOINES, Iowa — Property tax assessments shocked many Iowans who received them. In Polk County, for example, the average assessment rose 22% (although, actual property tax increases are capped at 3%). Those higher assessments fueled bipartisan work on a $100 million property tax cut package. The cuts, when fully phased in, provide the biggest benefits to seniors and military veterans.
How much can Iowans expect their property taxes to drop? Jeff Robinson, senior fiscal legislative analyst at the Iowa Legislative Services Agency, compiled estimates of the average share of the $100 million reduction.
Here’s his analysis:
Military Exemption: Division VI of the bill
Under current law and for almost all military property tax exemption beneficiaries, the exemption removes $1,850 from the value subject to tax. He calculates for FY 2023 the average property tax rate for residential property is $33.65 per $1,000 of taxed value, so the benefit on average is worth $62 per year.
The Bill raises the exemption value to $4,000 starting with FY 2025 (property taxes due in the fall of 2024 and the spring of 2025). Using the same $33.65 rate the average annual benefit will now be $135.
Homestead exemption for homeowners 65+: Section 30 of the bill
Under current law homes that qualify as homesteads are allowed a property tax credit for up to $4,850 in value subject to tax. The credit means the State pays the property tax in place of the homeowner through an annual General Fund appropriation. With an average residential property tax rate of $33.65 the homestead credit is worth $163 per year on average.
The Bill adds a $3,250 homestead exemption for qualified homeowners age 65+ for FY 2025 taxes and $6,500 for FY 2026 and after taxes. This will be on top of the homestead credit. The FY 2025 benefit on average is $109 and the average for FY 2025 and after is $219.
The average benefit is based on the statewide average tax rate. If a particular home is subject to a property tax rate higher than the $33.65, their benefit will be higher. Lower than $33.65 means a lower tax benefit.
Divisions I and II
Divisions I and II will also reduce property taxes although there is no way to predict for a given home. It will depend on the current level of their county and city tax rates and further depend on how quickly the tax base grows for their county or city.
Division III will reduce property taxes for those areas that currently utilize the Public Education and Recreation Levy as part of their school finance.