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 2025, Iowa’s individual income tax will drop to a 3.8% single tax rate due to recently signed legislation.
Iowa no longer taxes retirement income for taxpayers 55 or older.
[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.]
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Iowa income taxes
Iowa Income Tax Range
- The lowest Iowa personal income tax rate is 4.82% (on more than $6,210 of taxable income for single filers and more than $12,420 of taxable income for joint filers).
- The highest rate is 5.7% (on more than $31,050 of taxable income for single filers and more than $62,100 of taxable income for joint filers).
- However, the individual tax rate will drop to 3.82% in 2025 due to legislation signed in May 2024.
Iowa also has local income surtaxes used for schools and emergency medical services.
Iowa income taxes in retirement: All retirement income is exempt for taxpayers who are at least 55 years old. (Prior to last 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 2%, and the average combined rate is 6.941%, 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 1.49%, and the median property tax bill is $2,703.
Iowa Property Tax Breaks for Retirees
Iowa introduced a new Homestead Tax Exemption for Claimants 65 Years or Older last year. For the 2024 assessment year, the exemption (amount excluded from a property's taxable value) is worth $6,500.
Iowa motor fuel (gasoline) taxes
Gasoline: $0.30 per gallon
Diesel: $0.325 per gallon
Iowa taxes on alcohol and tobacco
| Cigarettes | $1.36 per pack |
| Other tobacco products | 50% of wholesale price |
| Beer | $0.19 per gallon |
| Wine | $1.75 per gallon |
| Liquor | State Controlled |
Iowa estate and inheritance taxes
Iowa started phasing out its inheritance tax three years ago by reducing the rate of tax by 20% each year (the original base rates ranged from 5% to 15%).
For 2024, 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.
The tax will be completely repealed on January 1, 2025.
Related Content
-
Seven Tips to Land Your First Client as a Financial Adviser or EntrepreneurBuilding customer relationships is easier when you start from a place of trust and empathy.
-
Asset Protection for Affluent Retirees in 2025Putting together a team of advisers to assist with insurance, taxes and other financial issues can help with security, growth and peace of mind.
-
More Taxes Could Slam New Yorkers Over MTA Budget ShortfallState Taxes Lawmakers warn that New Yorkers may need to brace for more taxes.
-
IRS Free File Is Now Open for 2025: Are Your Taxes Eligible?Tax Filing Official tax season doesn't begin until late January, but taxpayers can start filing free online returns now.
-
California Fires: How to Recover Tax Records and Other Important DocumentsDisaster Recovery Having your tax records and other vital documents is important for claiming casualty loss deductions that can help with recovery.
-
Child and Dependent Care Credit: How Much Is It?CDCTC The non-refundable tax break can help working families afford quality care for their child or qualifying dependent.
-
Gov. Hochul Wants to Triple the New York Child Tax CreditState Tax Millions of New York families could get a larger state child tax credit check over the next two years under a new proposal.
-
U.S. Consumers May Feel Pinch From Panama Canal Tariff HikeTax Policy The Panama Canal tariffs on crossing ships will add to looming price hikes for U.S. consumers as Trump threatens to take control of the historic waterway.
-
The American Opportunity Tax Credit (AOTC): How Much Is It Worth?Tax Credits This tax break can help you offset $2,500 in qualifying expenses tied to your higher education. Here's what you need to know.
-
Does Your State Have a Child and Dependent Care Tax Credit?
Child and Dependent Care Tax Credit Over two dozen states, plus the District of Columbia offer tax credits or deductions for working families.
