Do you ever wonder how your property tax bill is calculated? In this blog post, we will break down the property tax basics for you.
What is Iowa Property Tax?
The Iowa property tax is primarily a tax on "real property," which is mostly land, buildings, structures, and other improvements that are constructed on or in the land, attached to the land, or placed upon a foundation. Typical improvements include a building, house or mobile home, fences, and paving. Property taxes are not determined by a single individual who assesses your property and sends you a bill. Total property tax bills are a result of an 18-month evaluation and calculation process across multiple entities. The following classes of real property are evaluated for property tax purposes:
- Utilities/railroad (This class is assessed at the state level, not by the county)
The assessor (or the Iowa Department of Revenue) uses the classes above to estimate the value of everyone’s property. This estimate is called the “assessed value.” The assessed value is to be at actual or market value for most properties.
How Often is Property Assessed?
All real property is assessed every two years in odd-numbered years. Centrally assessed properties including railroads and public utilities are assessed every year by the Iowa Department of Revenue.
Residential, commercial, industrial, and state assessed properties are assessed at market value. Agricultural property assessment is based on a statewide productivity calculation intended to measure the property’s capacity to generate farm income.
Who Collects and Uses Property Taxes?
Property taxes are billed and collected by county government. County Treasurers collect tax revenues and then distribute or allocate the dollars to local authorities. Property tax supports many different "taxing authorities" including cities, counties, school districts, and townships. Taxing authorities may also include community college districts, agricultural extension districts, assessor offices, hospital districts, and sanitation districts. In addition, there are associations for fire protection, drainage, and other public needs that have authority to levy taxes.
Iowa has more than 2,000 taxing authorities and most property is taxed by more than one taxing authority.
How are Property Taxes Determined?
- The value of property is established by the assessor or Iowa Department of Revenue based on the previous year’s sales in your area. This is called the “assessed value.” The Linn County Assessor’s Office assesses real property in Linn County with the exception of property in Cedar Rapids. If you live in the city limits of Cedar Rapids, your assessor is the Cedar Rapids City Assessor.
- The Iowa Department of Revenue then calculates limitations on taxable valuation growth statewide for residential and agricultural property values. This process is referred to as “rollbacks,” which limits the effect of inflation on assessed values. Multiplying the assessed value of a property by the rollback equals the taxable value.
- The assessments of all taxable properties in Linn County are added together by the county assessor and reported to the county auditor. Assessments of all taxable properties within the City of Cedar Rapids are added together by the city assessor and reported to the county auditor.
- The Iowa Department of Revenue examines total assessed values across jurisdictions and equalizes them.
- Budgets are established by each taxing authority (e.g., cities, county, school districts, etc.). 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. Approved budgets are submitted to the county auditor.
- A tax rate is established by the county auditor who 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 rates for all taxing 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 and the county treasurer sends a final tax bill to the taxpayer.
The property tax amount for each property owner is calculated by taking the valuation (taxable value of real property) times the tax rate (amount of tax per $1,000 value), which equals the levy (property tax dollars generated). The total property tax bill is paid each year in two installments – one in September and one in March.
Learn more about Iowa property taxes on the Linn County Assessor’s site or by viewing the Property Tax Basics handout (PDF) from Linn County Finance & Budget. A two-part video series about how property taxes are figured is also available online.
Watch Part 1
Watch Part 2