State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees. Go to Retiree Tax Map Iowa Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Least Tax-Friendly Property taxes in Iowa are as high as the corn. That's the main reason why the Hawkeye State gets a poor tax rating for retirees. The median property tax rate in Iowa is the 11th-highest in the nation. That certainly doesn't help homeowners in Iowa.Income taxes are on the high end in Iowa, too. That's especially so for retirees with an above-average income. Plus, over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax.Iowa sales taxes are about average. There's also an inheritance tax in Iowa, which your heirs might have to pay. Income Tax Range Low: 0.33% (on up to $1,666 of taxable income)High: 8.53% (on taxable income over $74,970).Iowa also has local income surtaxes used for schools and emergency services. Taxation of Social Security Benefits Social Security benefits are not taxed by the state. Tax Breaks for Other Retirement Income Taxpayers age 55 or older can exclude up to $6,000 ($12,000 for joint filers) of federally-taxed income from a pension, annuity, self-employed retirement plan, deferred compensation, IRA, or other retirement plan.Military pensions and Railroad Retirement benefits are fully exempt. Sales Tax 6% state levy. Localities can add as much as 1%, and the average combined rate is 6.94%, according to the Tax Foundation.Groceries: ExemptClothing: TaxableMotor Vehicles: Exempt from ordinary sales tax, but subject to 5% one-time registration feePrescription Drugs: Exempt Real Property Taxes In Iowa, the median property tax rate is $1,529 per $100,000 of assessed home value. A property tax credit of up to $1,000 is available to residents age 65 or older. The program is limited to those with 2020 household income less than $24,206. Annual Car Taxes and Fees An annual vehicle registration fee based on the car's weight and age is imposed. Estate and Inheritance Taxes Iowa's inheritance tax ranges from 5% to 15%, depending on the amount of the inheritance and the relationship of the recipient to the decedent. However, no tax is due on property left to a surviving spouse, stepchildren, lineal descendants (children, grandchildren, etc.) or lineal ascendants (parents, grandparents, etc.). In addition, no tax is due if the estate's net value is less than $25,000. Brothers, sisters, sons-in-law and daughters-in-law owe 5% to 10% in tax, depending on the value of the property they inherit. Uncles, aunts, nieces, nephews and all other people inheriting property are taxed at rates ranging from 10% to 15%.