Property assessments only determine how the tax burden is shared. The key to lowering your taxes? Engage in your city, county, and school district’s budgeting process.
Each year, property owners receive updated assessments of their real estate values, often leading to concerns that higher assessments directly cause an increase in property taxes. While we don’t want to immediately dismiss every concern about assessments and valuations, we have to remind everyone of the root cause of growing property tax bills: spending decisions made by local governments. Valuations are just one part of the overall property tax equation and do not, by themselves, determine tax increases.
The Relationship Between Assessments and Taxes
A property assessment determines an owner’s share of the overall tax burden within a community. If every assessment in a given area were to double, but the community’s spending levels remained the same, property tax bills would not increase. Rather than determining the amount of local government spending, assessments attempt to allocate taxes fairly among property owners based on the market value of their properties.
When city councils, county boards, and school districts approve their budgets, they establish the total amount of revenue needed from property taxes. The role of the assessment process is simply to determine how that total amount is distributed among individual property owners. If budgets increase, taxes may rise regardless of whether assessments go up or down.
Assessed Value vs. Taxable Value
Did you know that your assessed value isn’t even part of the property tax equation? The factor local governments use to calculate your individual tax bill is actually the taxable value, not the assessed value. While there are several items that can reduce a property owner’s taxable value, the largest one for most Iowans is the rollback. The Iowa Legislature enacted a statewide rollback in 1978, which reduces the amount of your home that is subject to taxation. From the taxpayer’s perspective, the rollback percentage is a form of assessment limitation that helps keep property taxes from being on autopilot. The growth in total taxable value for Iowa’s residential property class is restricted to no more than 3% per year. (Click on the image to download a printable PDF.)
And are you ready for one more complicating factor? Don’t forget about equalization. Equalization is a process administered by the Iowa Department of Revenue that compares each county assessor’s data to actual property sales in each jurisdiction. If the sum total of assessments (by property class) are 5% or more above or below the actual sales data, then the department decreases or increases assessments accordingly to ensure the aggregate value of assessments closely mirrors actual transactions.
What to Do If You Disagree with Your Property Assessment
If you believe that your property has been over-assessed, there are steps you can take to challenge it. In Iowa, for example, assessors complete property evaluations and notify taxpayers of their property’s new values by April 1 of each assessment year. Property owners then have from April 2 to April 30 to protest their assessments.
The first step is to contact your local assessor for an informal review. This process can lead to an agreement to modify the assessment or a recommendation for a change that is submitted to the local Board of Review. If the informal review does not resolve your concerns, you can file a formal protest with the Board of Review, which meets annually in May to evaluate assessment appeals.
If you are unsatisfied with the Board of Review’s decision, you can further appeal to the Property Assessment Appeal Board (PAAB) or take your case to district court. The PAAB reviews cases and issues decisions in writing, and taxpayers have the right to appeal those decisions in court.
The Bottom Line: Engage in the Budgeting Process
If you are concerned about rising property taxes, the most effective action is to participate in local government budgeting decisions. Attend local government meetings and stay informed about proposed budget increases. Since tax rates are driven by government spending, advocating for responsible fiscal policies is the best way to influence your property tax burden. Assessments are not the cause of higher taxes; they only determine how the overall tax burden is divvied up. By understanding this distinction and knowing the steps to take if you feel your property is over-assessed, you can ensure that you are paying only your fair share.
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