Iowa Estate Tax: Everything You Need to Know

Iowa does not levy an estate tax, but Iowans may still have to pay the federal estate tax if they have enough assets. The Hawkeye State used to have an inheritance tax, but no longer does as of Jan. 1, 2025. This guide will walk Iowans through what they need to know to prepare their estates and make sure their families are taken care of when they pass away. It isn’t always simple to plan an estate, though, and you may want help. Take advantage of SmartAsset’s free matching tool to find financial advisors who serve your area.

Iowa Estate Tax

Iowa is one of 38 states that does not have an estate tax.

What Is the Estate Tax?

Sometimes referred to as the “death tax,” the estate tax is levied on the estate of someone who has recently died. It applies to the money and property within the estate before being passed on to a person’s designated heirs. Estates must reach a certain threshold before they are subject to the estate tax.

Don’t confuse estate taxes with inheritance taxes. Inheritance tax is a separate tax that is levied by certain states on money after it has already been passed on to a person’s heirs.

Iowa Inheritance Tax and Gift Tax

As of Jan. 1, 2025, Iowa no longer levies an inheritance tax.

For tax years 2024 and before, the state did levy an inheritance tax, meaning eligible beneficiaries were responsible for paying taxes on their inheritance. For this tax, there were a number of inheritor categories, but only two that were relevant for individuals:

Tax Rate B: This was for siblings, half-siblings and children-in-law. The rate ranged from 5% to 10%, based on the size of the inheritance.
Tax Rate C: This was for uncles, aunts, nieces, nephews, foster children, cousins, brothers-in-law, sisters-in-law and all other individuals. The rate ranged from 10% to 15%, depending on the size of the inheritance.

Under this now repealed tax, the following relations owed no inheritance tax when they inherited money from a deceased relative: parents, grandparents, great-grandparents, children, stepchildren, grandchildren, great-grandchildren and any other lineal ascendants or descendants. So if your relation to the person who left you money was any of the above, you wouldn’t have owed inheritance tax regardless of the size of your inheritance.

Iowa does not have a state gift tax. The federal gift tax has a $19,000 exemption for each gift recipient in 2025, up from $18,000 in 2024. So if you give a single person more than $19,000 in 2025, you must file that gift with the IRS. Your 2025 lifetime gift tax exemption of $13.99 million will then decrease, as will your federal estate tax exemption.

Federal Estate Tax

Though you won’t owe a state-level estate tax in Iowa, the federal estate tax may apply. The federal estate tax exemption increased to $13.99 million for deaths in 2025, up from $13.61 million for deaths in 2024. The exemption is portable for married couples, meaning two spouses can protect up to $27.98 million when they take the right legal steps.

Estates that exceed this exemption must pay the estate tax. Rates are progressive, with a top rate of 40%. A full table of rates is provided below.

Here’s an example: Let’s say an unmarried person has an estate that is worth $19.81 million. First, subtract the $13.99 million exemption. This leaves a taxable estate of $5.82 million, placing this estate in the highest bracket. The estate owes $345,800 as a base payment on the first $1 million, plus 40% on the remaining $4.82 million. That equals $1.928 million. Add that sum to the base payment and you’ll get a total estate tax burden of $2,273,800.

Federal Estate Tax Rates

Taxable Estate*	Base Taxes Paid	Marginal Rate	Rate Threshold**
$1 – $10,000	$0	18%	$1
$10,000 – $20,000	$1,800	20%	$10,000
$20,000 – $40,000	$3,800	22%	$20,000
$40,000 – $60,000	$8,200	24%	$40,000
$60,000 – $80,000	$13,000	26%	$60,000
$80,000 – $100,000	$18,200	28%	$80,000
$100,000 – $150,000	$23,800	30%	$100,000
$150,000 – $250,000	$38,800	32%	$150,000
$250,000 – $500,000	$70,800	34%	$250,000
$500,000 – $750,000	$155,800	37%	$500,000
$750,000 – $1 million	$248,300	39%	$750,000
Over $1 million	$345,800	40%	$1 million

*The taxable estate is the total above the 2025 federal exemption of $13.99 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.

Overall Iowa Tax Picture

Iowa’s retirement tax laws are very friendly for retirees. The state does not tax Social Security benefits, and it recently repealed all taxes on withdrawals from retirement accounts, like 401(k)s, IRAs and pension plans. For everyone else, the state’s income tax is progressive, with rates ranging from 4.4% to 5.7%.

The Hawkeye State’s effective property tax rate is 1.49%. The relatively low home values in the state, however, mean that property tax payments are below average.

Estate Planning Tips

A financial advisor can help you tasks related to estate planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
A living trust is one way to store your assets. It won’t protect you against estate taxes but it could help your estate avoid probate, which would make life easier for your family after you’ve died.