Iowa State Tax Guide

Iowa State Tax: Overview

Iowa's highest income tax bracket is lower than in many other states, but some residents must pay local income surtaxes in addition to Iowa state income tax. In 2026, Iowa will impose a flat income tax rate. The state no longer taxes retirement income for taxpayers 55 or older, and there is a new property tax break for retirees this year.

[Data for this state tax guide was gathered from several sources including the U.S. Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]

Iowa Income Taxes

Iowa Income Tax Range

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• The lowest Iowa personal income tax rate is 4.4% (on up to $6,000 of taxable income for single filers and up to $12,000 of taxable income for joint filers).
• The highest rate is 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.

Iowa also has local income surtaxes used for schools and emergency medical services.

Iowa Tax on Retirement Benefits: All retirement income is exempt for taxpayers who are at least 55 years old. (Prior to this year, taxpayers age 55 or older could only exclude up to $6,000 ($12,000 for joint filers) of federally-taxed income from retirement plans.)

Iowa Sales Tax

Iowa has a state sales tax rate of 6%. Localities can add as much as 1%, and the average combined rate is 6.94%, according to the Tax Foundation.

• Groceries are tax-exempt.
• Prescription drugs are tax-exempt.
• Diapers and some feminine hygiene products are tax-exempt.

How Much Are Property Taxes in Iowa?

In Iowa, the average effective property tax rate is 1.57%, which is higher than in most other U.S. states.

Iowa Property Tax Breaks for Retirees

Homestead Tax Exemption for Claimants 65 Years or Older: The homestead exemption for homeowners 65 and older is new for 2023. The exemption (amount excluded from a property's taxable value) is worth $3,250 this year. In 2024, the value of the exemption increases to $6,500.

Iowa Motor Vehicle Taxes

Motor vehicle purchases are exempt from ordinary sales tax but are subject to a 5% one-time registration fee.

Iowa taxes gasoline at $0.30 per gallon.

Iowa Alcohol and Tobacco Taxes

Iowa Estate and Inheritance Taxes

Beginning in 2021, Iowa started phasing out its 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 2023, Iowa's inheritance tax ranges from 2% to 6%, 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 2023, brothers, sisters, sons-in-law and daughters-in-law owe 2% to 4% in tax, depending on the value of the property they inherit. Uncles, aunts, nieces, nephews and all other people inheriting property in 2023 are taxed at rates ranging from 4% to 6%. The tax is completely repealed on January 1, 2025.

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