Tax Data Series

Real Property

Real Estate Taxes: Real Property Tax Relief: Ten Percent and Two and One Half Percent Rollbacks, and Homestead Exemption, by County, Distributed during Calendar Year 2011 (for Tax Year 2010)

Since 1971, a 10 percent reduction, or “rollback,” has applied to each taxpayer’s real property tax bill. It is limited to all real property not intended primarily for use in a business activity. Qualifying property includes property subject to the following uses: farming; leasing property for farming; occupying or holding or leasing property improved with single-family, two-family, or three-family dwellings; or holding vacant land that the county auditor determines will be used for farming or to develop single-family, two-family, or three-family dwellings

In addition, a 2.5 percent rollback of real property taxes is granted on a homestead (a dwelling plus up to one acre) that is occupied by the homeowner.

Lastly, owner-occupants who are age 65 or older or who are permanently and totally disabled may qualify for an additional reduction in their real property taxes by applying for a homestead exemption under Section 323.152(A). Each qualified homeowner is eligible for a credit worth the taxes that would have been charged on up to $25,000 in true value ($8,750 in taxable value). In other words, an eligible homestead worth $100,000 will essentially be taxed as if it is worth $75,000.

The Department of Education reimburses the schools for their share of the tax reductions and the Tax Commissioner reimburses the counties, townships, municipalities, and special taxing districts for their shares of the tax reductions. The county auditor also receives 2 percent of the amount reimbursed under Section 323.152 as payment for administering the homestead exemption and 3.0 percent rollback. Local governments are fully reimbursed from the state general revenue fund for these tax reductions.

Table PD-1 indicates that during calendar year 2011, the Departments of Taxation and Education together reimbursed local governments a total of $1,681.0 million, including $1,090.8  million for the 10 percent rollback, $378.7 million for the homestead exemption (including $2.4 million for late-filers), and $211.5 million for the 2.5 percent rollback (including $82,300 for late-filers).  Additionally, $15.6 million was paid by the Departments of Taxation and Education to county auditors for administering the homestead exemption ($11.4 million) and 2.5 percent rollback ($4.2 million). These administration payments are excluded from the table.