Iowa introduced several significant tax changes recently, most notably exempting some retirement income from state tax beginning in the tax year 2023. Below, we explain various Iowa state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.
For information regarding taxes in other states, see Retirement Taxes by State.
Iowa Tax Rates
|State Sales Tax||7%|
|Avg State/Local Sales Tax||7%|
|Gas Tax||$0.50 per gallon|
|Diesel Tax||$0.54 per gallon|
|Cigarette Tax||$0.995 per pack|
|Effective Tax Rate:||3.23%|
|Social Security Tax||None|
|Federal Income Tax Deduction:||None|
Iowa State Taxes Explained
Iowa Sales Tax
7%, with no local taxes.
Iowa now exempts diapers and menstrual products from its sales tax, as of January 2022.
Iowa Income Taxes
In 2022, Iowa consolidated its nine individual income tax rates into four. The top rate decreased from 8.53% to 6%. By 2026, the state is expected to shift to a flat tax rate of 3.9%.
Iowa Property Taxes
Iowa’s effective property tax rate is 1.56%, or $2,219 on the $142,300 median home value. Iowa property taxes vary by county. There are more than 2,000 taxing authorities in the state, and multiple authorities tax most property.
Iowa offers several property tax relief programs, some specifically for seniors and retired military members. The Rent Reimbursement and Property Tax Credit is available for citizens who are 65 and older or at least 18 years old with a disability. Income must be under $23,810. Approved applicants who own a home or mobile home get a credit on their property tax bill. Renters receive a rebate check.
See Iowa Tax Credits and Exemptions for a full list of property tax relief available from the state.
Iowa Retirement Taxes
Social Security and military pensions are fully exempt. Beginning in 2023, all retirement income is exempt for taxpayers 55 and older.
Iowa Estate and Inheritance Taxes
Iowa’s inheritance tax ranges from 0% to 15%. The tax amount depends on the relationship the heir has to the decedent and the amount of the inheritance. Exceptions are surviving spouses and lineal relatives (for example, children or parents) pay no tax if the estate’s net value is less than $25,000.
Iowa imposes no estate tax.