Signed into law on May 4th, 2023, with bipartisan support, Iowa House File 718 introduces significant changes to the property tax landscape, specifically the Homestead Tax Credit, for Iowa residents. This reform primarily benefits seniors and veterans by reducing their property taxes. Simultaneously, it imposes a cap on cities regarding the amount they can levy for property taxes based on revenue. Iowa Republicans project that these changes will yield $100 million in property tax relief statewide. This blog post explains who stands to gain from these changes and how to apply for property tax relief.
Unpacking the Changes Brought by the New Law
House File 718 modifies the existing Homestead Tax Credit to effectively reduce property taxes for Iowa's senior citizens and veterans. Rather than directly lowering property taxes, the Homestead Tax Credit reduces the taxable value of your property. Therefore, if you're over 65, and your house is assessed at $400,000, your property taxes for 2023 will be calculated based on a value of $396,750.
Moreover, the law mandates Iowa cities and counties channel increased revenue toward reducing property taxes over the next four years. Specifically, revenue growth exceeding 3% must be directed toward property tax relief. If the revenue does not grow by at least 3%, the new property tax reduction isn't mandatory.
Key Information for Seniors
Iowans aged 65 or older are immediately eligible for the property tax exemption. From 2023 onwards, Iowa seniors can take advantage of a property tax exemption worth $3,250, a figure that is set to double in future years.
To claim this credit, Iowa seniors must complete the Homestead Tax Credit form and submit it to their county assessor's office. To ensure the credit applies to this year, submit the form no later than July 1st, 2023. Late submissions will see the credit applied in 2024. If you have already secured this tax credit, no reapplication is necessary.
Important Notes for Veterans
The military service property tax exemption for Iowa veterans is set to more than double, rising from $1,852 to $4,000 beginning in 2023. This exemption is exclusively available to veterans who were honorably separated, retired, furloughed to a reserve, placed on inactive status, or discharged.
Like seniors, veterans who have already claimed this credit are not required to reapply. For those who haven't, please ensure you apply before July 1st to receive the property tax exemption for 2023.
Application Process
If you are eligible and need to apply for your property tax benefits, please find the relevant links to the forms provided by the Iowa Department of Revenue below:
Seniors: Homestead Tax Credit and Exemption 54-028 | Iowa Department of Revenue
Veterans: Military Service Tax Exemption, 54146 (iowa.gov)
House File 718 represents a noteworthy transformation in Iowa's property tax legislation, one that carries widespread implications for senior citizens, veterans, and city governments. As we navigate these changes, it's paramount that eligible individuals understand their potential benefits and act promptly to secure them. In the intricate maze of tax law, knowledge is power, and that power can lead to savings. At Boelman Shaw Tax & Financial Planning, we aim to keep Iowans informed of any changes that may impact their financial health.
Tax and accounting services provided through Boelman Shaw & Company, LLC.
Advisory services provided through BSC Capital Partners, LLC a state of Iowa registered investment advisor.