The financial investment required when you purchase your property doesn’t just end when you put down your deposit. In addition to mortgages and home insurance, you also need to factor in property taxes. We know it’s a lot to cover, but luckily for Iowa property owners, the homestead tax exemption can provide you with a little relief.
Key takeaways
Key points
- Iowa's homestead tax credit lowers the property taxes on the home you live in.
- It isn't automatic. You have to apply, and deadlines apply.
- Your homestead also has other legal protections under Iowa law, including limits on some judgments.
- Applying soon after you buy helps make sure you don't miss the credit.
What is a “Homestead?”
Iowa Code §561.1 defines a Homestead as “The homestead must embrace the house used as a home by the owner, and if the owner has two or more houses thus used, the owner may select which the owner will retain.” Iowa Code §561.2 limits the homestead to 1⁄2 acre within a city plat or 40 acres otherwise. This definition becomes important when we use other parts of the Law to gain advantages/ protections that the Homestead is entitled to.
What is the Homestead Tax Credit?
The basic concept is that a homestead exemption permits you to pay property taxes against all but a set amount of your home’s assessed value. Put simply, there is a portion of your home’s value that you do not pay property taxes on if you have applied for and been approved for the exemption. In the state of Iowa, this portion is the first $4,850 of your property’s net taxable value.
How the Homestead Exemption Works:
When it comes to the homestead exemption, it’s up to you to take the initiative.
To qualify, you must live in the Iowa property you own for 6 months of the year, be an Iowa resident, and live in the home on July 1. Should you fulfill these requirements, you must apply for the exemption on or before July 1st of the first year you will claim the credit. If you live in a nursing home or are in the military, you may also be eligible, even if you do not live in the home.
Either way, you must apply for the homestead tax credit as its benefit is not automatic for homeowners in Iowa. Danilson Law advises buyers to apply for the homestead tax credit within 30 days of closing on your purchase as life gets busy and this is one benefit that you either claim or your don’t receive if the deadline passes. Once approved, you will continue to receive the homestead property tax credit until you sell the home or unless you are no longer qualified.
All in all, the homestead tax credit usually results in a benefit of a couple hundred dollars, but if it is available to you, apply for it!
There are additional benefits attributed to a person’s homestead, such as the statutory prohibition for some types of judgments to not “attach” to a person’s homestead (Iowa Code §624.23). This is a topic for another blog, but should you have questions, please reach out to Danilson Law and we can share how we have helped clients close the sale of their home without losing thousands of dollars in proceeds to pay old judgments.
Property taxes are notoriously complicated, but if you get them right, you can save yourself and your family real money. Our team at Danilson Law focuses on real estate law matters. We can help you determine proactive steps you can take to help accomplish your real estate goals Feel free to call us at (515)512-5500 or complete our user-friendly contact form online.
What do homeowners ask about the homestead credit?
Yes. The credit isn't automatic. You apply through your county assessor, and there are deadlines. If you miss the deadline, you may lose the credit for that year. Once approved, it generally continues while you own and live in the home and still qualify. See Iowa Code section 425.2.
Under Iowa Code section 561.1, your homestead is the house you use as your home. Iowa law also limits its size: generally one-half acre inside a city plat or forty acres outside one (section 561.2).
In some cases. Iowa law limits the ability of certain judgments to attach to your homestead (Iowa Code section 624.23). This can matter a great deal when you sell. Whether it applies depends on the type of judgment and its timing, so have an attorney review any judgments that show up in your title work.
If you're selling and judgments or liens show up in the title work, talk with an attorney before closing. Danilson Law represents sellers across all 99 Iowa counties and reviews the title work so issues are addressed before closing day.
Have questions about your own property? Book a Discovery Call with Danilson Law, see our Iowa deed services, or call 515-512-5500. We work with clients in all 99 Iowa counties.
