The 2026 session is long over, the legislature adjourned in early May, and Governor Reynolds had signed the bills into law by early June. In previous newsletters during session, I talked about the property tax reform, and now I want to update everyone on what was finally passed and signed into law. We passed legislation that is a major win for Iowa property taxpayers. It’s expected to save Iowa taxpayers roughly $350 million in the first year and about $4 billion over 6 years.
I know most of you have gotten your property tax bill for the year by now. I want to make sure everyone understands that the legislation we passed primarily impacts property tax bills that you will receive in 2027, not this year. A legislative session is much too late to make significant changes to property taxes in the same year.
The final property tax reform package that we passed delivers for taxpayers by capping local government spending, buying down education levies, and increasing transparency.
The bill was Senate File 2472. To deliver certainty for the taxpayer and real tax relief, this proposal contains provisions to: Implement revenue caps on cities and counties to provide some certainty for taxpayers and introduce some accountability to local government spending. It includes a 2% hard cap on all general levies (new construction is not part of the 2% cap); 3% hard cap on DART and Emergency Management Authorities. 4% hard cap on county hospitals; the Debt levy, school funding, city special revenue, county supplemental, and community college variable levies remain uncapped.
The bill delivers real, tangible residential property taxpayer relief. It converts the homestead credit to an exemption (currently a $4,850 exemption) and expands it to a 10% exemption with a minimum of $5,500 and maximum of $20,000, while allowing the exemption to rise with CPI. It leaves in place the current military and senior exemptions and increases the elderly and disabled Iowans rental credit from $1,000 to $1,500. By converting to an exemption, the bill saves the money used for the credit that was provided by the state. It uses those funds saved to buy down the $5.40 levy to $4.90 – phased in over 3 years. It eliminates the backfill of the business property tax exemption and transfers the roughly $125 million to the Taxpayer Relief Fund to deliver additional tax relief. It also gradually increases the share of SAVE money collected from the sales tax devoted to property tax relief from the current 7% to 25% by 2031.
In addition, the bill introduces some common-sense fiscal responsibility practices in local government. It restricts the use of debt service funds for operating expenses and limits reserve accounts to 35 percent to ensure tax dollars aren’t sitting in stagnant accounts while residents struggle to pay their tax bills. We know that a large surplus of government money is an overcollection of tax dollars. It does allow an exception to this rule to allow for the creation of a new account that local governments can devote funds over the 35% to save for big infrastructure projects or big equipment expenses, like, for example, a fire truck. It limits TIF districts to 23 years, ensuring this economic tool is used for its intended purpose—temporary development—rather than becoming permanent drains on the tax base. The bill also empowers voters by allowing cities and counties to increase the EMS levy maximum from $0.75 to $1.50 via referendum, expanding access to emergency services. It shifts the burden of proof on the assessor when valuation increases by 10 percent or more, so that the government must justify why your bill is going up, not you. It revamps the informational mailer sent to every property taxpayer to increase transparency and give taxpayers a better idea of where their money is going and how it’s being spent. Finally, it creates a FirstHome Iowa program modeled after Iowa’s 529 accounts, helping Iowans save for their first home.
All along, our goal has been to provide certainty for all property taxpayers. We hear too many stories of Iowans being priced out of their homes by their skyrocketing property tax bills. It’s time for accountability in the system. It’s time for local governments to practice fiscal responsibility. And it’s time for real relief for homeowners.
With SF 2472, we delivered on another promise we made to Iowans.