Senate Republicans introduced a property tax plan on the first day of the 2026 legislative session — a plan that injects new ideas into the debate over how best to reduce residential property tax rates. Senate Majority Leader Mike Klimesh.
The bill would permanently increase the state’s homestead tax credit to 50 percent of a home’s taxable value. And it would eliminate property taxes for older Iowans who own their home. Senator Dan Dawson, a Republican from Council Bluffs, is chairman of the Senate Ways and Means Committee and the plan’s main architect.
Two elements of the plan would offset property tax revenue losses in city and county budgets. Local governments could go to voters and ask to increase the local option sales tax to one-and-a-half percent. It’s max today is one percent. The Senate Republicans are also proposing to add an inflation index to the state gas tax, which hasn’t been raised in a decade.
The plan has other elements, like eliminating several state-funded property tax exemptions and sending that state money to public schools — to reduce the amount property owners pay to their local school districts. Governor Kim Reynolds has said she’ll present a property tax plan to legislators. House Republicans are expected to unveil their own approach, and a key House lawmaker has indicated it will focus on limiting city and county budget growth.
