Property Tax Reform Takes Center Stage in the 2026 Legislative Session

Property tax reform remained one of the most closely watched and complex issues of the session. 

The House, Senate, and Governor each introduced sweeping proposals aimed at limiting property tax growth, increasing transparency, and providing relief to taxpayers. While the approaches differed, common themes included caps on revenue growth for local governments, expanded homestead exemptions, new tools to support first-time homebuyers, and reforms to property assessment practices. Proposals also addressed tax increment financing, local government budgeting, and long-term funding mechanisms for schools and infrastructure. 

After months of debate, negotiations, and competing proposals, Iowa lawmakers approved, in the final hours of the session, one of the most significant property tax reform packages in recent years with the passage SF2462. 

The bill introduces wide-ranging reforms that will impact homeowners, property owners, and communities across Iowa for years to come. From broad efforts to balance taxpayer relief to changes to the homestead tax benefit and the creation of a first-time homebuyers savings program, Iowa REALTORS® breaks down what SF2462 means for our members and their clients. 

Transition from Homestead Credit to Exemption
Beginning with assessment years starting on or after January 1, 2026, the bill transitions Iowa’s homestead tax benefit from a credit system to a flat exemption model. 

Under the previous system, homeowners received a tax credit applied against property taxes owed on up to $4,850 of a homestead’s value. Under the new structure, a portion of a home’s assessed value will be exempt from taxation before property taxes are calculated. The exemption is set at 10 percent of the homestead’s taxable value, with a minimum exemption of $5,500 and a maximum exemption of $20,000. 

Beginning in 2027, the maximum exemption amount will be adjusted annually for inflation.

Re-definition and Reinstatement of "Multiresidential" Class
Beginning with valuations established on or after January 1, 2027, the bill reinstates “multiresidential” as a separate property classification. However, properties containing two or fewer dwelling units will no longer fall under that category and will instead be classified and valued as residential property. For assessment year 2027, multiresidential property will be assessed at the same percentage of actual value as residential property for that year, plus an additional three percent. 

Starting in assessment year 2028 and continuing thereafter, multiresidential property will be assessed at a rate that is six percent higher than the residential property rate.

FirstHome Iowa Program
The bill creates a FirstHome Iowa Program, a state-run savings initiative that allows Iowa residents to open tax-advantaged accounts specifically for first-time homebuyer expenses, such as down payments and closing costs on a primary residence in Iowa. 

Participants can contribute up to $5,500 per beneficiary per year (indexed for inflation), with both contributions and account earnings deductible from Iowa state income taxes as long as funds are ultimately used for qualified homebuying expenses.

Check out these other important updates on the Iowa REALTORS® 2026 Legislative wins related to ADU Legislation and HOA Transparency/Home Inspector Clarifications, as well as a look at what we're keeping an eye on for 2027.