Iowa Tax Guide 2025
Explore Iowa's 2025 state tax rates for income, sales, property, retirement, and more. Learn how Iowa compares nationwide.


Katelyn Washington
Iowa state tax: Overview
Iowa residents will see lower tax bills this year, thanks to a drop in the state’s income tax rate. A major tax reform will bring the top rate down to a flat 3.8 percent in 2025, which puts Iowa among the states with the lowest personal income taxes. That is quite a shift from just a few years ago.
The state also does not tax qualified pension income or inheritances, making it especially appealing for retirees. Of course, with lower taxes, there is always the question of how public services will be funded. But for now, let’s take a closer look at Iowa’s changing tax landscape.
[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.]
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free 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 tax
Iowa adopted a single individual income tax rate in 2025, which lowers the income tax from its top rate of 5.7% to a flat 3.8%. That’s significantly lower than the peak rate of nearly 9% about six years ago when state lawmakers first began reducing the personal income tax.
According to state documents, a flat individual income tax rate of 3.9% is scheduled to go into effect in 2026. Reducing the income tax is expected to bring in nearly $1 billion in tax savings for Iowans within the first two years.
As reported by Kiplinger, the measure adds the state to the 14 states that have a flat income tax rate, it's also earned the state a spot among the lowest income tax in the nation.
Additionally, there is an income surtax for schools which is a local option tax based on the taxpayer’s Iowa income tax liability. For 2025, that should equal a surtax of 2.5% of your state individual income tax liability.
Iowa income taxes in retirement: All retirement income is exempt for taxpayers who are at least 55 years old, there is also no inheritance tax as of 2025.
Iowa retirement taxes
Iowa recently made retirement income tax-exempt for residents 55 and older and eliminated its inheritance tax for tax years 2025 and later.
Income Tax on Taxable Income: High of 5.7% for 2024 (on more than $31,050 for single filers and more than $62,100 for joint filers)
For 2025, Iowa moved to a flat tax rate of 3.8%.
- Social Security: Not taxable
- Pensions: Not taxable
- 401k and IRA Distributions: Not taxable
Iowa sales tax
Iowa has a state sales tax rate of 6%. Localities can add as much as 0.94%, and the average combined rate is 6.94%, according to the Tax Foundation.
- Groceries: Exempt
- Prescription drugs: Exempt
- Clothing: Taxable
- Diapers and some feminine hygiene products: Exempt
How much are property taxes in Iowa?
In Iowa, the average effective property tax rate is 1.40%.
The property tax cycle in Iowa happens across eighteen months. Residents and property owners get an individual assessed value of their property on January 1. The first half payment for property taxes is due in the fall of the next year, and the remaining portion is paid in the spring.
That means, the assessment for January 2025 would be associated with taxes due in fall 2026 and spring of 2027, according to Iowa’s Department of Revenue.
Iowa Property Tax Breaks for Retirees
Iowa introduced a new Homestead Tax Exemption for Claimants 65 Years or Older last year. For the 2025 assessment year, the exemption (amount excluded from a property's taxable value) is worth $6,500.
Additionally, military service tax exemptions were raised to $4,000 in taxable value for assessment years on or after January 1, 2023.
Iowa gas tax
Iowa has close to the lowest gas tax rates in the nation, making it a good choice for commuters.
Gasoline | $0.31 per gallon |
Diesel | $0.33 per gallon |
Source: Sales Tax Handbook
Iowa taxes on alcohol and tobacco
Product | Tax amount |
---|---|
Cigarettes | $1.36 per pack of 20, $1.70 per pack of 25 |
Other tobacco products | 50% of wholesale price |
Medical Marijuana | 0% |
Source: Sales Tax Handbook
Product | Tax amount |
---|---|
Beer | $0.19 per gallon |
Wine | $1.75 per gallon |
Liquor | State Controlled |
Source: Sales Tax Handbook
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 ranged 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 has been completely repealed as of January 1, 2025.
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Gabriella Cruz-Martínez is a finance journalist with 8 years of experience covering consumer debt, economic policy, and tax.
Gabriella’s work has also appeared in Yahoo Finance, Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier.
As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances, no matter their stage in life.
- Katelyn WashingtonFormer Tax Writer
-
Dave Ramsey Tells Us the Biggest Retirement Mistake You Can Make
The talk-show host, author and podcaster tells Kiplinger what people can do to ensure a happy retirement.
-
Pros and Cons of Alternative Assets in Workplace Retirement Plans
While alternatives offer diversification and higher potential returns, including them in your workplace retirement plan would require careful consideration.
-
The Rubber Duck Rule of Retirement Tax Planning
Retirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think.
-
RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax Rules
Quiz Don't let the IRS catch you off guard. Take our quiz to reveal common retirement tax rules that could save (or cost) you thousands.
-
IRS Updates 2026 Tax Deduction for People Age 65 and Older
Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
IRS Reveals New 2026 Child Tax Credit and other Family Credit Amounts
Tax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth.
-
Standard Deduction 2026 Amounts Are Here
Tax Breaks What is the standard deduction for your filing status in 2026?
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025
Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
New Tax Rules: Income the IRS Won’t Touch in 2025
Income Taxes From financial gifts to Roth withdrawal rules, here’s what income stays tax-free under the new Trump 2025 tax bill, and some information on what’s changed.
-
Three Popular Tax Breaks Are Gone for Good in 2026
Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. High-income earners could also get hit by a 'surprise' tax bill.