How Are Property Taxes Calculated?
Property taxes are calculated using multiple factors, which include valuations, rollback rate, and levies established by multiple taxing entities. There a multiple steps that need to take place in order to calculate property taxes:
- Determine the Value of the Property
- The County assessor estimates the value of each property, this value is updated every other year on January 1st of years ending in an odd number.
- Due to the events involved in property assessment it takes approximately 18 months for a property to be tax on the valuation. A valuation established on January 1, 2019 will not have the property taxes due until September 2020 & March of 2021.
- Establish the Rollback Rate
- The Iowa Department of Revenue reviews all the valuations prepared by the assessors and applies a process called "equalization" to ensure the property values are comparable among jurisdictions and complies with Iowa code. This process is commonly called "rollback" and is used in a response to inflation.
- The established rollback rate is used to determine the property's taxable value. If the rollback rate increases, a higher percentage of the property it subject to property tax, if the rollback rate decreases a lower % of the property is subject to property tax.
- Budgets/Tax Rates are Established
- Valuations are released to each taxing entities (City, Schools, County, Transit, Community College, etc.) and each entity determines its own budget and tax rate.
- The tax rate is per $1,000 of taxable valuation
- Consolidated Tax Rate is Established
- The county auditor collects the rates from all the taxing authorities, the rates are added together result in a single tax levy called a consolidated tax rate.
- Credits are Subtracted
- Credits applied for at the County level such as the Homestead Credit are subtracted from the tax bill.
Property Tax Formula
Total Valuation multiplied by Rollback Rate = Taxable Valuation
Taxable Valuation divided by 1,000 multiplied by Consolidated Tax Rate = Gross Tax Rate
Gross Tax Rate minus Credits = Total Property Tax
Residential Property is valued by the county assessor at $150,000.
State of Iowa Determines the Residential Rollback rate is 56.92%.
Consolidated Tax Rate is $35.21 per $1,000 of valuation. ( $10.99 City, $17.85 Schools, $4.16 County, $2.21 Others)
Homestead Credit is $58.
$150,000 (Total Value) multiplied by 0.5692 (Rollback Rate) = $85,380 (Taxable Value)
$85,380 (Taxable Value) divided by 1,000 = $85.38 multiplied by $35.21 = $3,006.23 (Gross Tax)
$3,006.23 (Gross Tax) minus $58 (Homestead Tax Credit) = $2,948.23 (Total Property Tax)