Iowa sets property-tax limits and provides exemptions for homeowners

Local governments must follow tax-growth limits, reserve rules, and restrictions on borrowing for daily operations. County general and rural services and city general funds use 2% growth formulas. Covered hospital levies use 4% formulas. Regional transit and local emergency-management tax funding use 3% limits. These are not limits on every person's tax bill. County and city formulas exclude added taxable value from construction, improvements beyond normal repairs, and boundary changes. Certain other levies allow exceptions for first-year collection and voter-approved rate increases. The reserve limit excludes schools and governments with a highest-category bond rating; money committed to specific uses is accounted for separately. The borrowing rule excludes capital spending, capital leases, and services paid from legally designated funds other than debt-service funds. County and city rules take effect January 1, 2027, for fiscal years beginning on or after July 1, 2027. Reserve and service-tax limits also start with those fiscal years. The borrowing prohibition applies on or after July 1, 2026.

Eligible homeowners receive an exemption that removes part of their home's value from property taxation. The exemption covers eligible owner-occupied homes. The general homestead credit is unavailable for assessment years beginning on or after January 1, 2026; the separate veterans-related credit follows its own eligibility rules. The maximum exemption adjusts for inflation starting with the 2027 assessment year. Owners must meet homeownership, Iowa residency, and occupancy requirements. Eligible owners with existing claims receive the exemption without filing again. For the special veterans-related full-tax credit, applications on or after July 1, 2026, cover no more than one-half acre and exclude related structures and other appurtenances. State replacement payments to local taxing bodies equal two-thirds of the specified 2026 credit payments in fiscal 2027 and one-third in fiscal 2028, with additional exclusions for schools. The homestead provisions apply retroactively to assessment years beginning on or after January 1, 2026. Temporary replacement payments cover fiscal years beginning on or after July 1, 2027, but before July 1, 2029.

The state treasurer administers FirstHome Iowa savings accounts with state income-tax benefits. Account money can pay a first-time buyer's down payment, closing costs, and other allowed purchase expenses for an Iowa home that the buyer will occupy. The buyer must be an Iowa resident who has never individually or jointly owned or purchased a single-family or multifamily home. The purchase must occur at least one year after the account was first opened. Contributions are deductible up to $5,500 per beneficiary each year, adjusted for inflation. Account interest and earnings are excluded from Iowa taxable income. Previously deducted contributions must be added back to taxable income when refunded after cancellation or withdrawn or transferred for expenses outside the program's allowed uses. The tax benefits apply to contributions made on or after July 1, 2026, for tax years ending on or after that date. Accounts under the older first-time homebuyer savings chapter cannot be opened on or after July 1, 2026.

Schools follow scheduled property-tax rates and budget limits, while school sales-tax funding continues through its scheduled 2071 end date. These rules cover public school districts, their basic school property tax, and the Secure an Advanced Vision for Education fund, which receives part of state sales-tax revenue. School reorganization and dissolution rules provide separate foundation-tax rates. The prior-year unspent balance used in a school's authorized budget cannot exceed the stated 35% measure unless the school budget review committee approves more. Schools with enrollment above their budget estimate may request extra spending authority; committee approval is discretionary. The school fund's equity-transfer share follows a schedule reaching 25% for the fiscal year beginning July 1, 2030, and each year thereafter. School-tax provisions apply to fiscal and school budget years beginning on or after July 1, 2027. School balance rules took effect upon enactment. The sales and use tax reduction from 6% to 5% is scheduled for January 1, 2071.

Property assessments and state payments to local taxing bodies follow separate rules for multiple-home properties and commercial or industrial property. The assessment rules cover property classified as multiresidential, meaning the law's separate multiple-home property category. The replacement-payment rules cover eligible local taxing districts. Multiple-home property is assessed at the residential assessment percentage plus three percentage points in 2027 and six percentage points from 2028, never above 100% of actual value. Homes containing two or fewer dwelling units fall within the residential classification. Commercial and industrial replacement payments compensate local taxing bodies under the specified assessment formula; they are not payments to individual business owners. The classification provisions take effect January 1, 2027, and apply to assessment years beginning on or after that date. The $125 million annual replacement-payment provision covers fiscal years beginning July 1, 2024, through June 30, 2027.