State-by-State Guide to Taxes on Middle-Class Families
Tool | November 2021

Iowa State Tax Guide for Middle-Class Families

State tax rates and rules for income, sales, gas, property, cigarette, and other taxes that impact middle-class families.


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The Bottom Line
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Least Tax-Friendly

Which do you think is higher in Iowa: the corn or taxes? It might be taxes, thanks to steep income and property taxes in the state. One reason why income taxes are on the high end in the state is because over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax. But relief is on the way in the form of reduced state income tax rates over the next few years. Property taxes in the Hawkeye State are high as well. Sales taxes are only "average," but that doesn't help much with the state's overall tax burden on middle-class families.

Income Tax Range

Low: 0.33% (on up to $1,676 of taxable income)

High: 8.53% (on taxable income over $75,420).

Alternative tax rates and computation methods are allowed for certain lower-income taxpayers. Iowa also has local income surtaxes used for schools and emergency medical services.

For 2022, the lowest rate applies to taxable income up to $1,743, while the highest rate applies to taxable income over $78,435.

Beginning in 2023, the lowest Iowa personal income tax rate will be 4.4% (on up to $6,000 of taxable income for single filers and up to $12,000 of taxable income for joint filers), while the highest rate will be 6% (on more than $75,000 of taxable income for single filers and more than $150,000 of taxable income for joint filers). The top rate will drop to 5.7% in 2024 and then to 4.82% in 2025. Starting in 2026, a flat rate of 3.9% will apply.

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: Exempt
Clothing: Taxable
Motor Vehicles: Exempt from ordinary sales tax, but subject to 5% one-time registration fee
Prescription Drugs: Exempt

Real Property Taxes

In Iowa, the median property tax rate is $1,561 per $100,000 of assessed home value.

Motor Fuel Taxes

Gasoline: 30¢ per gallon.
Diesel: 32.5¢ per gallon.

Sin Taxes

Cigarettes and little cigars: $1.36 per pack
Snuff: $1.19 per ounce
Other tobacco products: 50% of the wholesale price, not to exceed $0.50 per cigar

Beer: $0.19 per gallon
Wine: $1.75 per gallon
Liquor: $13.03 per gallon
Liquor tax is an estimate by the Distilled Spirits Council of the United States and published by the Tax Foundation.

Annual Car Taxes and Fees

An annual vehicle registration fee based on the car's weight and age is imposed.

Estate and Inheritance Taxes

Beginning in 2021, Iowa started phasing out it's inheritance tax over a five-year period by reducing the rate of tax by 20% each year (the original base rates ranged from 5% to 15%). For 2022, Iowa's inheritance tax ranges from 3% to 9%, 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. For 2022, brothers, sisters, sons-in-law and daughters-in-law owe 3% to 6% in tax, depending on the value of the property they inherit. Uncles, aunts, nieces, nephews and all other people inheriting property in 2022 are taxed at rates ranging from 6% to 9%. The tax is completely repealed on January 1, 2025.