Why a $919,000 house would get a tax abatement under the proposal being studied by the Decorah City Council

Last month decorahnews.com posted a news story about how your property taxes are calculated.  (http://www.decorahnews.com/archived-stories/2014/08/8873.html)  At that time we stated that figuring out how much you owe in property taxes is a three-step process.  First local governments set their property tax rates.  This is the step the public pays the most attention to—but it isn't the only step.  The second step is determining what the assessed valuation of your home is.  That's the value that an assessor places on your property.  But your property tax bill is calculated through a third step—figuring out the net property assessed valuation.

As we wrote, "Each year the State of Iowa announces a "residential rollback" figure.  In 2011 the taxable value was 50.7 percent of market value; in 2012 that figure was 52.8 percent; and in 2013, that figure was 54.40 percent."

If your property was valued at $200,000, let's say, you would be taxed on the figure of $108,800. This is your "net taxable property value" and it's this figure—not your assessed valuation—that is used to calculate your property tax bill.

Which brings us to the property tax abatement proposal being considered by the Decorah City Council.  In response to a question by a city council member Monday night, city officials disclosed that the proposal's $500,000 valuation cap on qualifying for a tax abatement is a $500,000 "net taxable property value" cap.

In other words, if you build a new house and the Assessor's Office says it's worth $919,000, that figure would be multiplied by the "residential rollback" figure of 54.40 percent.  $919,000 x 54.40 percent == $499,936.  In other words, your new house would qualify for the tax abatement.  In other words, it is also accurate to say that the tax abatement program would be open to people who build a new home worth as much as $919,000.