The 2026 legislative session began with a clear promise from Iowa lawmakers: taxpayers would come first. By the time the session concluded, that promise had produced major reforms in property taxes, conservative budgeting, constitutional taxpayer protection, and increased oversight of federal funds. While debates over the details were often intense, the session ultimately delivered another round of taxpayer-focused policy victories in Iowa.
Going into the session, property tax reform was THE headline-grabbing issue. Across the board, Iowans had been demanding property tax relief. Early in the session, Governor Kim Reynolds, along with Republicans in the Senate and House, each introduced major property tax reform measures.
All three bills were comprehensive, proposing multiple significant reforms to the existing property tax system. During her Condition of the State Address, Governor Reynolds reminded the legislature that government spending was the cause of high property taxes and that limiting spending needed to be part of any meaningful property tax reform effort.
At the heart of the property tax debate was the question of whether a “soft” or “hard” property tax cap was needed. Governor Reynolds and House Republicans proposed a 2% “hard” cap, while Senate Republicans proposed a 2% “soft” cap indexed to inflation. Under the Senate proposal, the cap could have increased to as high as 5% depending on inflation. Additional debates revolved around possible revenue enhancements, such as increases to the gas tax or local option sales taxes. In the end, those additional revenue streams were not included.
The comprehensive bill being sent to Governor Reynolds for her signature includes a 2% growth cap on various city and county levies, an idea rooted in Iowans for Tax Relief’s longstanding call for such protections. For cities, the cap does not apply to the debt service levy, unified law enforcement levy, insurance levy, or employee benefits levy. Similar county levies will also remain uncapped, as will counties’ ability to levy for elections. Growth resulting from new construction will not count against the cap.
Lawmakers also included reforms to school funding The school foundation property tax levy rate will be reduced from $5.40 to $4.90. To offset that reduction, the state will provide additional funding to school districts from the General Fund, and a larger share of SAVE (Secure an Advanced Vision for Education) revenue will be directed toward property tax relief. This will occur through a gradual increase in the portion of SAVE funds dedicated to property tax relief until it reaches 25% in Fiscal Year 2031.
The Homestead Credit will be replaced with a Homestead Exemption. State funding for the credit will be phased out over a three-year period. The new exemption will equal 10% of property valuation, with a minimum of $5,500 and a maximum of $20,000, and it will adjust with inflation. The compromise also preserves existing exemptions and credits for seniors and veterans.
It is estimated that this legislation will save taxpayers more than $4 billion over the next six years. In describing the significance of the reform, Governor Reynolds stated:
“By capping local government revenue growth at 2% with clear and responsible guardrails, this plan brings certainty and discipline to a system that needed both. We’re also quadrupling the Homestead Tax Exemption, raising it to $20,000 so more of a home’s value is protected against taxes. And by lowering school levies while fully maintaining school funding, the state is stepping up to carry a greater share of the responsibility, easing the burden on Iowa taxpayers while keeping our commitment to strong public schools.”
It is also worth noting that Iowa is one of many states that pursued property tax reform this year. In many cases, those reform efforts either failed or fell woefully short. Viewed through that lens, Iowa’s legislation is more extensive and offers stronger protections than what many other states have been able to accomplish.
Governor Reynolds and the Republican-led legislature made conservative budgeting a priority. The legislature approved a $9.6 billion budget for Fiscal Year 2027, representing a 1.4% increase over the previous year’s budget.
“With only a modest 1.4% increase to the state budget, Republicans are delivering big for Iowans,” stated Governor Reynolds. After two consecutive years of increased spending, lawmakers viewed spending restraint as imperative due to federal policy changes and uncertainty in the national economy, both of which contributed to lower revenue projections.
Following previous action by the Senate, the House passed a proposed constitutional amendment requiring a two-thirds majority vote in both chambers of the legislature to increase the income tax. With House approval of this taxpayer protection, the measure will now appear on the November 2026 General Election ballot, giving voters the chance to make it more difficult to raise taxes in the future.
A two-thirds majority requirement in the constitution is one of the most significant taxpayer protections advanced by the legislature over the past decade. Not only would it shield the paychecks and bank accounts of all Iowans, but constitutional safeguards are the most solid form of taxpayer protection, ensuring that laws cannot be easily changed at the whims of future legislatures.
Finally, the legislature passed a measure that may not have received the same attention as other issues, but one that could provide long-term stability for Iowa’s fiscal foundation and for taxpayers. Lawmakers approved a provision requiring a monthly report to be filed with both chambers of the legislature and the Legislative Services Agency (LSA) detailing any federal funds or grants in excess of $5 million.
This additional transparency and oversight of federal funds is critical. Federal dollars come with consequences. The national debt continues to increase at alarming rates, federal policy changes are becoming more frequent, and the instability of the federal budget process creates ongoing uncertainty about future funding levels. Federal funds can be reduced or eliminated at any time. Iowa must be prepared and maintain a clear understanding of what federal funds and grants are flowing into the state, as well as the impact those dollars have on programs and services. This new provision will provide needed oversight and accountability while helping preserve Iowa’s fiscal stability for taxpayers.
Taken together, the major actions of the 2026 legislative session reflected a broader commitment to protecting taxpayers and strengthening Iowa’s long-term fiscal foundation. While no piece of legislation is ever perfect, lawmakers advanced meaningful reforms that imposed greater discipline on government spending, provided stronger protection against future tax increases, increased transparency surrounding federal funds, and, of course, delivered substantial property tax relief. Just as importantly, these reforms recognized a principle that too often gets overlooked in government: the money being spent first belongs to the Iowa families, farmers, and businesses who earned it.
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