State-by-State Guide to Taxes on Retirees - Iowa
Tool | November 2019

State-by-State Guide to Taxes on Retirees

Iowa

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The Bottom Line
Flag of Iowa

Not Tax-Friendly

The Hawkeye State’s top income tax rates are steep, but retirees can exclude up to $6,000 of retirement-plan distributions if single ($12,000 if married) from state income taxes. Social Security benefits are free of state income tax. Property taxes run high, with senior-citizen breaks reserved for those with relatively low household income.

State Sales Tax

6.0% state levy. Localities can add as much as 1%, and the average combined rate is 6.82%, according to the Tax Foundation.

Income Tax Range

Low: 0.36% (on up to $1,598 of taxable income)

High: 8.98% (on taxable income over $71,910)

In 2019: Low: 0.33% (on up to $1,638 of taxable income) High: 8.53% (on taxable income over $73,710). Iowa also has local income surtaxes used for schools and emergency services; the average rate is 0.22%, according to the Tax Foundation.

Residents can deduct federal income taxes on their state return.

Effective tax rate: 4.43% for single filers, 7.03% for joint filers.

Social Security

Benefits are not taxed.

Exemptions 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, IRA, or other retirement plan.

Military pensions and Railroad Retirement benefits are fully exempt.

Property Taxes

In Iowa, residents pay an average of $1,678 in taxes per $100,000 of assessed home value.

Tax breaks for seniors:A property tax credit of up to $1,000 is available to residents age 65 or older. The program is limited to those with 2018 household income less than $23,216.

Vehicle Taxes

Vehicles are subject to a one-time registration fee of 5% of the sales price.

Inheritance and Estate Taxes

Iowa’s inheritance tax ranges from 0% to 15%, depending on the amount of the inheritance and the relationship of the recipient to the decedent, with these exceptions: No tax is due on property left to a surviving spouse, stepchildren, lineal descendants (children, grandchildren, etc.) or lineal ascendants (parents, grandparents, etc.), and no tax is due if the estate’s net value is less than $25,000.

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