Property Tax Rate Determined

Process Steps
  1. The value of property is established. The assessor (or the Iowa Department of Revenue) estimates the value of each property. This is called the "assessed value."
  2. The assessments of all taxable properties are added together. The assessor totals the assessed value in each classification and reports it to the county auditor.
  3. The department examines total assessed values and equalizes them. Each assessor sends the reports, called "abstracts," to the Iowa Department of Revenue. The abstract shows the total taxable values of all real property in each jurisdiction by classification of property, not by individual property.
    1. A process called "equalization" is applied every two years to ensure that property values are comparable among jurisdictions and according to law.
    2. In addition, the "assessment limitation" is applied every year. This process is commonly called "rollback" and is used in response to inflation.
  4. Budgets are established. Each taxing authority determines its own budget. 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.
    1. Each approved budget is submitted to the county auditor.
  5. A tax rate is established. The county auditor 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 result is referred to as "dollars per thousand." For example, if the dollars per thousand were $10, the tax on a home valued at $50,000 would be calculated at $10 times 50. The tax on that home would be $500 for that single taxing authority.
    1. Since more than one taxing authority is calculating a tax rate for the property, all the rates are added together, resulting in a single tax levy called a consolidated levy. This consolidated levy is always the result of two or more tax rates established by different government entities.
  6. Credits are subtracted. Credits such as the Homestead Credit are subtracted before a final tax bill is sent to the taxpayer.

Before you ever see your tax bill, two additional steps occur to test and adjust assessments to legal levels.

In Step 3 above, the Iowa Department of Revenue is responsible for "equalizing" assessments every two years. Following is a general explanation of the purpose of equalization.

The department compares the assessors’ abstracts to a "sales assessment ratio study" it has completed independently of the assessors. If the assessment (by property class) is 5% or more above or below the sales ratio study, the department increases or decreases the assessment. There is no sales ratio study for agricultural and industrial property.

Equalization occurs on an entire class of property, not on an individual property. Also, equalization occurs on an assessing jurisdiction basis, not on a statewide basis.

Equalization is important because it helps maintain equitable assessments among classes of property and among assessing jurisdictions. This contributes to a more fair distribution of state aid, such as aid to schools. It also helps to equally distribute the total tax burden within the area.

More than 20 years ago, residential property values were rising quickly. To help cushion the impact of high inflation, the Legislature passed an assessment limitation law called rollback.

Increases in assessed values for residential and agricultural property are subject to this assessment limitation formula. If the statewide increase in values of homes and farms exceeds 4% due to revaluation, their values are "rolled back" so that the total increase statewide is 4%. Rollback is also available for industrial and commercial property when necessary.

This does not mean that the assessment on your home will increase by only 4%. The rollback is applied on a class of property, not an individual property. This means that the statewide total taxable value can increase by only 4% due to revaluation.