Real Estate Taxes: Real Property Tax
Ten Percent and Two and One Half Percent Rollbacks,
and Homestead Exemption, by County, Distributed during
Calendar Year 2009 (for Tax Year 2008)
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). Starting
with the 2007 tax year (bills payable in 2008), income tests
and tiered benefits were no longer applied. Instead, 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, starting with the
2007 tax year, 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 2.5 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 2009, the
Departments of Taxation and Education together reimbursed
local governments a total of $1,589.6 million,
including $1,042.0 million for the 10 percent rollback,
$344.6 million for the homestead exemption (including $2.7
million for late-filers), and $203.0 million for the 2.5
percent rollback (including $74,965 for late-filers).
Additionally, $11.0 million was paid by the Departments of
Taxation and Education to county auditors for administering
the homestead exemption ($6.9 million) and 2.5 percent
rollback ($4.1 million). These administration payments are
excluded from the table.