IowaSF 247291st General Assembly (2025–2026)SenateWALLET

A bill for an act relating to state and local government taxes, fees, financial authority, and budgets, by modifying property assessment provisions, divisions of revenue, and funding from the secure an advanced vision for education fund, establishing a program for first-time homebuyers, modifying and making appropriations, and including effective date, applicability, and retroactive applicability provisions. (Formerly SSB 3001.) Effective date: 05/18/2026, 07/01/2026, 01/01/2027. Applicability date: 01/01/2026, 07/01/2026, 01/01/2027, 07/01/2027, 07/01/2028.

Sponsored By: COMMITTEE ON WAYS AND MEANS

Signed by Governor

ways and means

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Bill Overview

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44 provisions identified: 21 benefits, 7 costs, 16 mixed.

Full homestead tax relief for veterans

The homestead credit covers all homestead property taxes for eligible veterans with qualifying total disabilities and certain former National Guard members. Certain surviving spouses and children also qualify, including people receiving dependency and indemnity compensation. A surviving spouse must remain unmarried; eligibility based on that compensation ends when payments stop. Claimants cannot combine this credit with the specified paragraph c credit or other veterans' real-property tax benefits.

Housing improvements qualify for revitalization relief

Qualifying commercial or multiresidential property in revitalization areas gets a 100% exemption on value added by improvements. It must have at least three living quarters and use at least 75% of its space for housing. A separate exemption covers the first $75,000 of improvements for five years in designated residential development areas. That exemption covers qualifying multiresidential property but excludes the classification listed in section 441.21(13)(a)(5). Counties can also include multiresidential property in revitalization areas, though designation alone does not grant a tax break.

Homeowners gain stronger assessment challenge rights

Starting with assessment year 2027, assessors must defend qualifying residential valuations in protests or appeals. Actual value must rise at least 10% compared with either of the two prior assessment years, including through equalization. The property's class and primary use must stay unchanged. Increases caused by construction, improvements, or renovations do not qualify. The burden shift does not automatically lower the assessment or tax bill.

New savings accounts for first-time homebuyers

The state treasurer runs FirstHome Iowa, a savings trust for Iowa residents who have never owned or purchased a residence, alone or jointly. Accounts must be open at least one year before buying a single-family Iowa home used as the beneficiary's homestead. Funds cover down payments, closing costs, related purchase charges, and qualifying veterans administration funding fees. Participants can cancel and recover their balance, subject to program terms, fees, and costs. They also receive their balance if the program ends before paying qualified expenses.

Seniors keep an added homestead exemption

Eligible homeowners age 65 by January 1 can apply their age-based exemption after the new homestead exemption. The age-based exemption removes up to $6,500 of taxable value for assessment years beginning January 1, 2024. The amount for assessment year 2023 is up to $3,250. These amounts reduce taxable value, not the tax bill dollar for dollar.

Solar installations avoid added property value

Installing or building a qualifying solar energy system does not increase property value for five full assessment years. The protection covers actual, assessed, and taxable value. It applies to agricultural, residential, multiresidential, commercial, and industrial property. Other changes to the property can still affect its tax bill.

Higher limits for housing tax relief

Covered property tax credit and rent reimbursement claims can count up to $1,500, up from $1,000. This applies to property taxes due in fiscal years beginning July 1, 2027, or later. For rent reimbursements, it applies to base years beginning January 1, 2026, or later. The $1,500 limit is not a guaranteed payment; other program rules determine the benefit.

Lower school property tax rates ahead

The school foundation levy stays at $5.40 per $1,000 of assessed value for budget years beginning before July 1, 2028. It falls to $5.10 for the budget year beginning July 1, 2028. It falls again to $4.90 for the budget year beginning July 1, 2029, and later years. These cuts lower this part of property taxes, not necessarily the total bill.

New property tax break for homeowners

Starting with the January 1, 2026, assessment year, eligible Iowa homesteads receive a new exemption. It removes 10% of taxable value, with a $5,500 minimum and $20,000 maximum. The maximum adjusts for cumulative inflation beginning in 2027. These amounts reduce taxable value, not taxes dollar for dollar; savings depend on local tax rates.

Tax breaks for first-home savings

FirstHome Iowa contributions made on or after July 1, 2026, qualify for an Iowa income tax deduction. This applies to tax years ending on or after that date. The annual deduction cannot exceed contributions or $5,500 per beneficiary, with the cap adjusted for consumer price increases. Contributions made by the income tax filing deadline can count toward the preceding calendar year. Trust interest and earnings included in income can also be subtracted from Iowa income beginning July 1, 2026.

Farm credits track school tax rates

Family farm and agricultural land credits use the applicable school foundation levy rate instead of a fixed $5.40 benchmark. The change applies to qualifying property taxes due in the fiscal year beginning July 1, 2027. Credit calculations can therefore follow changes in that levy rate. The final credit depends on the property and the program's calculation.

Cities and counties face levy limits

For fiscal years starting July 1, 2027, through June 30, 2030, covered city and county levies face formula limits. The formula uses 102% of current certified tax dollars divided by budget-year assessed value minus new valuation. New valuation includes construction, non-repair improvements, and net boundary changes; applicable replacement taxes count toward tax dollars. Beginning July 1, 2030, the lower of that formula or a fixed ceiling applies. Ceilings per $1,000 are $3.50 for county general services, $3.95 for rural services, and $8.10 for city general funds, excluding section 384.12 levies.

More local levies face growth caps

For fiscal years starting July 1, 2027, covered rate-limited levies use 102% of current certified dollars divided by budget-year assessed value. Applicable replacement taxes count, while specified school, county, city, transit, and other levies are excluded. The formula does not apply to a levy absent the prior year or a qualifying newly voter-approved rate increase. County extension levies cannot exceed the prior year's amount plus the increase allowed under these rules. Iowa cannot use its levy-limit suspension authority to waive these caps.

State offsets business property assessment limits

Iowa provides $125 million annually for the fiscal-year period from July 1, 2024, through June 30, 2027. Payments offset specified commercial and industrial property assessment limits for eligible local taxing districts. The calculation uses those assessment limits and applicable levy rates. County treasurers receive September and March installments for distribution. Payments are prorated if the appropriation cannot cover calculated amounts.

Higher assessment shares for multi-unit housing

Beginning January 1, 2027, qualifying properties with more than two dwelling units enter a separate multiresidential property class. Qualifying parts of a parcel can receive separate classifications. In 2027, the assessment percentage equals the residential percentage plus three percentage points, capped at 100%. In 2028 and later years, the addition rises to six points, with the same cap. This can raise taxable assessments; tax bills also depend on property values and local rates.

New veteran claims face acreage limits

For veteran homestead credit applications made on or after July 1, 2026, the covered homestead cannot exceed one-half acre. Related property features, called appurtenances, are excluded. Applications made before that date keep the existing homestead definition. Some new applicants therefore have less property covered by the credit.

Revitalization tax breaks face tighter limits

Counties cannot grant revitalization tax exemptions for commercial, residential, or multiresidential property inside city limits. Residential and multiresidential revitalization exemptions also cannot reduce school district levies in areas established on or after July 1, 2024. In older areas, that school-tax rule applies when the first-year exemption application was filed on or after that date. Affected owners still owe school taxes even when their other property taxes are exempt.

First-home tax breaks require qualified use

Beginning July 1, 2026, previously deducted FirstHome Iowa contributions must be added back to Iowa income after cancellation refunds. The same rule covers withdrawals or transfers used for expenses other than qualified homebuyer costs. The add-back cannot exceed the amount previously deducted.

Sales tax cuts delayed twenty years

Iowa keeps its state sales and use tax rates at 6% until January 1, 2071. Both rates then fall to 5%, rather than falling on January 1, 2051. Compared with the old schedule, taxable purchases face one extra percentage point of tax during 2051 through 2070.

FirstHome savings gain protections and limits

Beginning July 1, 2026, FirstHome Iowa provides state-run savings accounts for qualified first-time home purchases in Iowa. Contributions earn an Iowa income-tax deduction up to $5,500 per beneficiary yearly, adjusted for inflation. Contributions must be cash; investment directions are limited to four times yearly, and funds are limited to qualified homebuyer expenses. Participants can change participation or request an eligible replacement beneficiary in writing under the treasurer's rules. Creditors cannot seize contributions, earnings, or gains, and Iowa cannot use these assets for other purposes.

Homeowners shift from credits to exemptions

Starting with assessment year 2026, the general homestead credit on the first $4,850 of value ends, except for eligible veterans. The law also repeals a separate homestead credit. A new exemption removes 10% of taxable homestead value, with a $5,500 minimum and $20,000 maximum, adjusted for inflation. Eligible existing claimants receive the new exemption without a separate claim and keep benefits they still qualify for without refiling.

Larger housing properties get separate assessments

Beginning January 1, 2027, residential classification generally covers homes with two or fewer dwelling units; larger properties become multiresidential. The multiresidential assessment percentage is residential's percentage plus three points in 2027 and six points afterward, capped at 100%. Multiresidential property still follows residential treatment for equalization, the process used to align assessments. Property leaving section 42 assessment procedures becomes multiresidential if it meets that class's requirements. For assessment years 2022–2026, specified properties are excluded from residential assessment-limit calculations, including a listed category with at least three units.

Counties can raise emergency medical taxes

For fiscal years beginning July 1, 2027, or later, authorized counties can levy more for emergency medical services. The maximum rises from $0.75 to a firm ceiling of $1.50 per $1,000 of assessed value. Counties authorized for the fiscal year beginning July 1, 2026, remain capped at $0.75 without voter approval. Their voters must approve a higher rate at an election held on or after July 1, 2026. A higher adopted rate raises property taxes and provides more money for emergency medical services.

Longer school funding with changing shares

The law extends school SAVE funding to January 1, 2071, rather than ending it on January 1, 2051. The fund receives one-sixth of specified remaining sales and use tax revenue after required deposits and transfers. Its equity transfer share is 12.5% for fiscal years beginning in 2026, 15% in 2027, and 17.5% in 2028. That share rises to 22.5% in 2029 and 25% in 2030 onward, shifting money toward school aid and away from other SAVE allocations. Starting with fiscal years beginning July 1, 2026, the state reconciles district allocations in the following fiscal year.

More school taxes stay with schools

Starting July 1, 2028, covered school foundation taxes stay outside urban renewal revenue divisions. This covers ordinances adopted from January 1, 2027, and divisions subject to the 60% limit for that year. Starting July 1, 2027, school taxes on qualifying exempt homes in overlapping revitalization and urban renewal areas go to schools when collected. From that same fiscal-year start, districts can voluntarily transfer foundation taxes under ordinances adopted from January 1, 2027. Transfers require a written request and board resolution filed with the county auditor, and do not change state foundation aid.

Local reserves face caps and audits

For budget years beginning July 1, 2027, covered governments' proposed unassigned general-fund reserves cannot exceed 35% of current-year budgeted spending before transfers. Schools and entities with a highest-classification budget-year bond rating from an approved rating service are excluded. The state withholds tax certification until an over-limit budget is fixed and recertified; audits must check compliance and explain actual reserve overages. Covered governments must separately track restricted, committed, assigned, and nonspendable money, including specified equipment and infrastructure funds. They may also carry qualifying unpaid year-end obligations on their books under government accounting standards.

New limits on development tax diversions

Covered revenue divisions adopted on or after May 18, 2026, end after 23 years, counted from the year after first qualifying certification. Existing divisions not subject to the prior statutory duration limit face a 60% municipal special-fund cap after a twenty-year period. That period starts at the later of May 18, 2026, or the calendar year after first qualifying certification. Municipalities can exceed 60% to pay debt incurred before May 18, 2026, but cannot add debt payable from the division or use school foundation taxes while exceeding it. Community-college revenue divisions and rural improvement zones are excluded.

State spending limits and relief transfers

Iowa lowers its general fund spending limit by $125 million for July 1, 2027, through June 30, 2028. In fiscal year 2028–2029, excess economic emergency fund money covers the difference between actual net general fund revenue and the adjusted estimate through a taxpayer relief fund transfer. Another $125 million of remaining excess goes to the taxpayer relief fund. Any excess left afterward goes to the general fund. These transfers do not establish an individual rebate.

Broader licensing exemptions for homeowner repairs

Owner exemptions from specified electrical and plumbing licensing rules now recognize homes eligible for either the homestead credit or exemption. The home must be the owner's principal residence, an existing dwelling, and no larger than a single-family dwelling. The electrical exemption also excludes an apartment attached to another apartment or building. The plumbing exemption covers qualifying farm work, but excludes commercial, industrial, and public-use installations.

Clearer home assessments and fairer protests

Starting with assessment years beginning January 1, 2027, assessors must explain residential actual-value increases of at least 10%. The trigger compares the value with either of the two preceding assessment years. Explanations must identify reasons, portions tied to specified causes, and information used in valuation formulas or methods. The law also bans private, one-sided communications with board of review members about protests before the board. These protections do not automatically lower an assessment or tax bill.

School mergers bring temporary levy discounts

Beginning July 1, 2027, qualifying property gets a school foundation levy discount after district reorganization or approved dissolution. The discount is $1 per $1,000 of assessed value in the initial year. It falls to $0.50 the next year and $0.25 the following year. The full statewide rate applies in the third succeeding year and afterward.

Small owner-occupied rentals gain exemption access

The law extends the specified owner-occupied rental exemption to owners qualifying for either a homestead credit or homestead exemption. The building must contain no more than four independent housing accommodations. The owner must live in one of them. This change expands access to the rental exemption; it does not create a separate dollar payment.

County hospital levies face growth limits

For fiscal years beginning July 1, 2027, covered county hospital levies face a new formula cap. It uses 104% of current-year actual property tax dollars divided by budget-year assessed value minus new valuation. Applicable replacement taxes budgeted by the hospital count in the calculation. This limits covered levies but does not guarantee a lower household tax bill.

Workforce housing gains economic development authority

Iowa's economic development law now includes providing workforce housing and policies that advance it. Municipalities and public or private entities can treat qualifying workforce-housing investment as economic development. This expands legal authority but does not provide a specific appropriation, household payment, or guaranteed housing access.

Temporary payments replace local homestead revenue

Local taxing authorities receive temporary homestead-credit replacement payments, not direct household checks. For the fiscal year beginning July 1, 2027, payments equal two-thirds of eligible fiscal year 2026 receipts. For the fiscal year beginning July 1, 2028, the share falls to one-third. Calculations exclude the specified veteran-credit amounts and subtract school amounts tied to the foundation levy. Payments flow through county treasurers in September and March; the temporary funding section is repealed July 1, 2030.

Multifamily owners lose district tax exemptions

Specified multiresidential property cannot use the residential exemption from self-supported improvement district operating and capital taxes. The existing exception for residential property in designated historic districts remains. Parcels residential when qualifying district bonds were issued also lose debt-tax protection if later classified as multiresidential or designated historic. This debt rule covers outstanding district bonds other than revenue bonds. Otherwise, the debt-tax exemption continues while the parcel remains residential.

Governments cannot borrow for routine operations

Beginning July 1, 2026, Iowa government entities cannot issue property-tax-backed debt to fund general operations. They also cannot use proceeds from that borrowing for general operations. The definition excludes specified capital spending, capital leases, and services financed through statutory funds other than debt service funds. This limits government financing options without setting household taxes or service levels.

Homeowners face updated claim and safety rules

Homestead claim rules now cover exemptions as well as credits, generally requiring ownership and at least six months of home use. People 65 or older or with disabilities can request forms; others can do so with county authorization. Single-family applicants must certify a compliant smoke detector is installed or will be within 30 days after filing. Carbon monoxide alarms require the same certification for homes with fuel-fired equipment, a fireplace, or an attached garage.

Tax notices improve but can move online

For budgets beginning July 1, 2027, county auditors must provide plain-language property tax statements by March 15. Clearly marked as not tax bills, they show values, current and proposed taxes, hearing and protest details, and budget links. Statements also include website information and a phone number for questions. Counties can post a website link instead of mailing the statement. Local governments with social media accounts must post the statement or a link on each account by March 15.

Unusual sales get different assessment treatment

Beginning January 1, 2026, assessors must ignore abnormal sale prices or adjust them to remove market-value distortions. Examples include built-to-suit, sale-leaseback, leased-fee, and related-party sales. For transfers beginning that date, declaration-of-value forms must provide space to report facts affecting the sale price. Correcting distorted prices can raise or lower the value used to calculate property taxes.

School budgets gain options and limits

For school budget years beginning July 1, 2026, or later, the prior-year unspent balance used in budgets faces a 35% cap. The percentage uses authorized expenditures from the budget year immediately before the base year; the school budget review committee can approve exceptions. Districts whose actual enrollment exceeds budget enrollment can request an on-time adjustment. That adjustment cannot exceed the enrollment difference multiplied by district cost per pupil. The board must pass a resolution and notify the committee by its deadline; the committee can establish a modified supplemental amount.

Emergency management tax growth faces limits

For fiscal years beginning July 1, 2027, or later, combined covered emergency management levies cannot exceed 103% of the prior-year amount. The calculation includes applicable utility replacement taxes. This cap applies in addition to other property tax levy limits. It limits tax growth and funding growth for local emergency management agencies and commissions.

Regional transit tax growth faces limits

For fiscal years beginning July 1, 2027, or later, covered regional transit property tax funding faces a 103% annual limit. The district-wide limit combines district levies and money received from participating cities and counties. Each city's covered levy for a regional transit district also cannot exceed 103% of its prior-year amount. Both calculations include applicable utility replacement taxes. These caps limit tax growth and the revenue available for transit.

Some development areas lose twenty-year cutoff

The law removes the former twenty-year revenue-sharing cutoff for qualifying economic development urban renewal areas. These areas must have no slum or blighted conditions. This permits continued revenue division beyond the former cutoff, subject to the law's separate duration and revenue limits. The change concerns how local governments divide taxes, not a stated household tax rate.

Sponsors & Cosponsors

Sponsor

COMMITTEE ON WAYS AND MEANS
Affiliation unavailable

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 234 • No: 111

Senate vote • 5/3/2026

Passed Senate

Yes: 41 • No: 1

House vote • 5/2/2026

Passed House

Yes: 62 • No: 22

House vote • 4/22/2026