Taxes in Iowa
Iowa State Tax Quick Facts
- Income tax: 0.33% - 8.53%
- Sales tax: 6% - 7%
- Property tax: 1.53% average effective rates
- Gas tax: 30 cents per gallon of regular gasoline, 32.5 cents per gallon of diesel
Earlier this decade, Iowa enacted one of the largest tax cuts in the state’s history. While that cut was largely focused on commercial property owners, it also lowered residential property taxes across the state. Even so, with an effective property tax rate of 1.53%, Iowa’s property taxes are the 11th-highest in the country.
The state’s income tax system features one of the highest top rates, which at 8.53% ranks among the highest states. But it also has one of the lowest bottom rates. Earners in Iowa’s bottom tax bracket pay a rate of just 0.33%. The sales tax in Iowa, meanwhile, ranges from 6% to 7% when including local rates, which is near the national average.
A financial advisor in Iowa can help you understand how these taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
Iowa Income Taxes
The Hawkeye State’s income tax system has nine income brackets, with marginal rates between 0.33% and 8.53%.
Income Tax Brackets
- All Filers
|Iowa Taxable Income||Rate|
|$0 - $1,676||0.33%|
|$1,676 - $3,352||0.67%|
|$3,352 - $6,704||2.25%|
|$6,704 - $15,084||4.14%|
|$15,084 - $25,140||5.63%|
|$25,140 - $33,520||5.96%|
|$33,520 - $50,280||6.25%|
|$50,280 - $75,420||7.44%|
These rates are assessed on Iowa taxable income, which is income after all deductions have been subtracted. In Iowa, you may claim itemized deductions even if you claimed the standard deduction on your federal return. However, you can instead choose to claim the Iowa standard deduction: $2,130 for single filers and married persons who are filing separately, and $5,240 for married persons filing jointly and heads of household.
After determining their Iowa state tax liability, many Iowa taxpayers must pay a school district surtax. This is equal to a percentage of Iowa taxes paid, with rates ranging from 0% to 20%. So, for example, if your Iowa tax liability is $1,000, and your school district surtax is 15%, you would pay an additional $150. The table below shows the school district surtaxes for all Iowa school districts that collect a surtax.
School District Surtaxes
|School District||Surtax Rate|
|Central De Witt||7%|
|East Sac County||1%|
|MFL Mar Mac||0%|
|Maple Valley-Anthon Ot||2%|
|North Fayette Valley||7%|
|Odebolt Arthur Battle||1%|
|South Central Calhoun||1%|
|Van Buren County||0%|
|West Central Valley||5%|
|West Delaware Co||5%|
|West Des Moines||0%|
|Western Dubuque Co||6%|
Iowa Tax Credits
Iowa offers several types of tax credits to state taxpayers. The Earned Income Tax Credit is available to Iowa residents who have an income below a threshold that varies depending on your number of dependents. The credit is worth 15% of the amount of your federal credit.
The Child and Dependent Care Credit is equal to up to 75% of the federal credit. The percentage diminishes with higher levels of income and is zero for taxpayers with income of $45,000 or higher. Taxpayers who do not claim that credit may claim the Early Childhood Development Credit, which is equal to 25% of the first $1,000 of certain expenses paid for children ages three though five.
The Tuition and Textbook Credit is available to taxpayers with a dependent who is in school, from kindergarten through grade 12. The credit is 25% of the first $1,000 paid for tuition and books.
Iowa Sales Tax
The base sales tax rate in Iowa is 6%, but many counties collect an additional “local optional” tax of 1%, meaning the actual rate collected in most places is 7%. A few counties do not collect that additional tax on a county-wide basis, but some cities within those counties do.
Iowa taxes all tangible personal property (with a few exceptions) as well as most services. Some examples of the types of services that are taxed in Iowa are haircuts, television subscriptions, dating services, exterminators, dry cleaning, shoe repair, Turkish baths and vehicle repair.
The most significant exception to the sales tax in Iowa is food. Most items you can find in a grocery store or market are not taxable. For example, bread, fish, frozen foods, fruit, tea and butter are all exempt. Food prepared for immediate consumption and candy are all taxable, however. Prescription drugs and many non-prescription medications are also tax-exempt. No tax is collected on insulin, nebulizers, oxygen or diabetic testing devices.
Clothing is also exempt during Iowa’s annual sales tax holiday. During the first Friday and Saturday in August, clothing and footwear costing less than $100 can be purchased sales tax-free.
Iowa Property Tax
Property taxes in Iowa are based on a variety of factors. State and local governments calculate the overall rate for residential homes in a certain tax district based on the total value of homes in that area and the total amount of revenue the tax needs to generate. That rate is then applied to the assessed value of each home. This means that rates can go up or down from year to year, even if your own home’s value does not change.
The average property tax paid in Iowa is around $2,430 a year. That is slightly lower than the national average, but because Iowa home values are also lower than the national average, the average effective property tax rate (annual taxes as a percentage of home values) ranks much higher. The average effective property tax rate in Iowa is 1.53%, higher than all but 10 other states.
If you’re thinking about buying a home in the Hawkeye State or looking into refinancing a property, our Iowa mortgage guide lays out the most important information about mortgage rates, the different kinds of loans and details about each county.
Iowa Inheritance Tax
While there is no estate tax in Iowa, inheritances left to certain beneficiaries may be taxed. If the decedent’s estate has a net value below $25,000, there is no tax. Likewise, surviving spouses, lineal descendants (children, step-children, grandchildren, great-grandchildren), lineal ascendants (parents, step-parents, grandparents, great-grandparents) are all exempt from the tax.
Other beneficiaries pay rates that vary depending on their relation to the deceased. Brothers and sisters pay between 5% and 10%, with any inheritance over $150,000 facing the top rate. Nieces, nephews, aunts, uncles and all unrelated beneficiaries pay between 10% and 15%, with all inheritances over $100,000 facing the top rate.
Starting with the 2021 tax year, Iowa is repealing its state inheritance tax. This is scheduled to happen on Jan. 1, 2025, with rates gradually decreasing over time.
Iowa Gasoline Tax
The gas tax in Iowa is 30 cents per gallon of regular fuel and 32.5 cents per gallon of diesel. These are both a bit above national averages.
Iowa Cigarette Tax
Iowa has a cigarette tax of $1.36 per pack.
Iowa Capital Gains Tax
Both long- and short-term capital gains are taxed at the full Iowa income tax rates, depending on your income tax bracket.
Iowa Alcohol Tax
Excise taxes on alcohol in Iowa vary depending on the type of alcohol being sold. Liquor faces a rate of $12.49 per gallon, while the tax on beer is much lower at 19 cents per gallon.
- The Iowa state flag is similar to the French flag. This is because the state was originally a part of French Louisiana.
- Agricultural crops cover 60% of Iowa’s land area.
- Every four years the Iowa Caucuses receive significant national attention because they are the first event in the process to select presidential candidates.
Iowa Tax Rates, Collections, and Burdens
Iowa has a 6.00 percent state sales tax rate, a max local sales tax rate of 1.00 percent, and an average combined state and local sales tax rate of 6.94 percent. Iowa's tax system ranks 38th overall on our 2022 State Business Tax Climate Index.
If you are using filing status 1 (single), you are exempt from Iowa tax if you meet either of the following conditions: Your net income from all sources, line 26, is $9,000 or less and you are not claimed as a dependent on another person's Iowa return. ($24,000 if you are 65 or older on 12/31/14)What is the Iowa income tax rate for 2022? ›
On March 1, 2022, Governor Reynolds signed into law Iowa's most significant tax reform bill in state history, establishing a 3.9% flat income tax rate, eliminating state tax on retirement income, reforming corporate income tax and more.What is the Iowa state income tax rate for 2021? ›
2021 Iowa Income Tax Brackets and Rates for All Filing Statuses.
|If your Iowa taxable income is over:||But not over:||Your tax is:|
|$40,000||$50,000||$1,911 - $2,533|
How to calculate income tax? (See example)
|Up to Rs 2,50,000||Exempt from tax||0|
|Total Income Tax||Rs 12,500 + Rs 25,500+ Rs 37,500 + Rs 50,000 + Rs 62,500 + Rs 1,77,600 + Rs 14,604||Rs 3,79,704|
1. Wyoming. Congratulations, Wyoming – you're the most tax-friendly state for middle-class families! First, there's no income tax in Wyoming.What states have the worst taxes? ›
- California 13.3%
- Hawaii 11%
- New Jersey 10.75%
- Oregon 9.9%
- Minnesota 9.85%
- District of Columbia 8.95%
- New York 8.82%
- Vermont 8.75%
Iowans are taxed at 0.33% on the first $1,676 of their income; 0.67% up to $3,352; 2.25% up to $6,704; 4.14% up to $15,084; 5.63% up to $25,140; 5.96% up to $33,520; 6.25% up to $50,280; 7.44% up to $75,420; and 8.53% for income over $75,420.How much is 60k a year after taxes in Iowa? ›
If you make $60,000 a year living in the region of Iowa, USA, you will be taxed $13,183. That means that your net pay will be $46,817 per year, or $3,901 per month. Your average tax rate is 22.0% and your marginal tax rate is 35.3%.What is the standard deduction for Iowa taxes? ›
2020 Iowa Individual Income Standard Deductions
The state standard deductions in 2020 for Iowans are also set to rise slightly: $2,110 for single tax filers. $2,110 for married taxpayers filing separately. $5,210 for married filing jointly.
Is Iowa tax-friendly for retirees? Iowa is moderately tax-friendly. Social Security benefits are exempt from the Iowa state income tax. Other forms of retirement income are taxed, but seniors are eligible for a deduction of up to $6,000 on that income, or $12,000 if they file jointly.How much can a retired person earn without paying taxes in 2022? ›
In 2022, this limit on your earnings is $51,960.
We only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.
|Filing Status||2022 Standard Deduction|
|Single; Married Filing Separately||$12,950|
|Married Filing Jointly; Surviving Spouse||$25,900|
|Head of Household||$19,400|
If you make ₹ 50,000 a year living in India, you will be taxed ₹ 6,000. That means that your net pay will be ₹ 44,000 per year, or ₹ 3,667 per month.How much income tax will be deducted from my salary? ›
|Income Tax Slabs||TDS Deductions||Tax Payable|
|Up to Rs.2.5 lakhs||Nil||Nil|
|Rs.2.5 lakhs to Rs.5 lakhs||10% of(Rs.5,00,00-Rs.2,50,00||Rs.25,000|
|Rs.5 lakhs to Rs.6.33 lakhs||20% of(Rs.6,33,00-Rs.5,00,00)||Rs.26,600|
States That Don't Tax Retirement Income
Eight states have no state income tax. Those eight – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – don't tax wages, salaries, dividends, interest or any sort of income.
Unfortunately, there are no states without a property tax. Property taxes remain a significant contributor to overall state income. Tax funds are used to operate and maintain essential government services like law enforcement, infrastructure, education, transportation, parks, water and sewer service improvements.What are the 13 states that don't tax pensions or Social Security? ›
- New Hampshire.
- State Income Tax Range: 2.2% (on taxable income from $2,001 to $5,000) to 6.6% (on taxable income over $60,000)
- Average Combined State and Local Sales Tax Rate: 0%
- Median Property Tax Rate: $568 per $100,000 of assessed home value.
- Estate Tax or Inheritance Tax: None.
Alaska has the lowest tax burden throughout the entire U.S. It's one of nine states currently with no state income tax. The property tax is on the higher side at 3.68%, but the sales tax is near the bottom at 1.42%.
These states include the nine that don't have any income tax at all, which are:
- New Hampshire.
- South Dakota.
- Tax Rate:0.33% Income Range:$0 - $1,743. ...
- Tax Rate:0.67. Income Range:$1,743 - $3,486. ...
- Tax Rate:2.25% Income Range:$3,486 - $6,972. ...
- Tax Rate:4.14% Income Range:$6,972 - $15,687. ...
- Tax Rate:5.63% Income Range:$15,687 - $26,145. ...
- Tax Rate:5.96% ...
- Tax Rate:6.25% ...
- Tax Rate:7.44%
If Federal income tax is withheld on a flat rate basis, Iowa income tax must be withheld at the rate of 6 percent.How much taxes do I pay on $14000? ›
If you make $14,000 a year living in the region of California, USA, you will be taxed $1,330. That means that your net pay will be $12,670 per year, or $1,056 per month. Your average tax rate is 9.5% and your marginal tax rate is 18.8%.What are the tax brackets for 2022? ›
|Tax Rate||For Single Filers||For Married Individuals Filing Joint Returns|
|12%||$10,275 to $41,775||$20,550 to $83,550|
|22%||$41,775 to $89,075||$83,550 to $178,150|
|24%||$89,075 to $170,050||$178,150 to $340,100|
|32%||$170,050 to $215,950||$340,100 to $431,900|