Menu burger Close thin Facebook Twitter Google plus Linked in Reddit Email arrow-right-sm arrow-right
Loading
Tap on the profile icon to edit
your financial details.

Iowa Retirement Tax Friendliness

Your Details Done

Overview of Iowa Retirement Tax Friendliness

Iowa exempts all Social Security income from income taxes and provides a deduction on other types of retirement income. However, Iowans age 55 and older will be exempt from paying state taxes on retirement income for tax year 2023 (which will get filed in 2024). While the state is also gradually repealing its inheritance tax, Iowa property taxes are higher than the national median.

To find a financial advisor who serves your area, try our free online matching tool.

Enter your financial details to calculate your taxes
Annual Social Security Income
Dismiss
Annual Retirement Account Income
Dismiss
Annual Wages
Dismiss
Location
Dismiss
Year of Birth
Dismiss
Filing Status
Annual Income from Private Pension
Dismiss
Annual Income from Public Pension
Dismiss
You will pay of Iowa state taxes on your pre-tax income of
Your Tax Breakdown
Federal
State
Local
Total Taxes
Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
Save more with these rates that beat the National Average
Unfortunately, we are currently unable to find savings account that fit your criteria. Please change your search criteria and try again.
Searching for accounts...
As of
Marketing Disclosure
Unfortunately, we are currently unable to find savings account that fit your criteria. Please change your search criteria and try again.
Searching for accounts...
As of
Marketing Disclosure
Share Your Feedback
How would you rate your experience using this SmartAsset tool?
What is the most important reason for that score? (optional)
Please limit your response to 150 characters or less.
Thank you for your answer! Your feedback is very important to us.

Iowa Retirement Taxes

Photo credit: ©iStock.com/omersukrugoksu

While Iowa has no turquoise waters or white-sand beaches, it still offers plenty for seniors who are in or approaching retirement. Cities like Des Moines and Cedar Rapids offer culture and fine dining, while smaller towns like Ames and Dubuque have quiet streets and a low cost of living. But what about the Hawkeye State’s tax environment?

Iowa exempts all Social Security income from income taxes, and as of January 2023, excludes other forms of retirement income. However, it is one of the few states with an inheritance tax. Its property taxes are also higher than average.

A financial advisor can help you plan for retirement and other financial goals. 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.

Is Iowa tax-friendly for retirees?

Iowa is certainly tax-friendly for retirees. Social Security benefits are exempt from the Iowa state income tax. Meanwhile, Iowans age 55 and older are also exempt from paying state taxes on retirement income, including distributions from a 401(k), IRA, pension, annuity and other assets.

Additionally, taxpayers 55 and older who do a Roth conversion may also qualify for a retirement income exemption. And those under age 55 may also get a tax break if they inherited a retirement plan from someone else. For more details, check the Iowa state website

Retirees should keep in mind that property taxes in Iowa come in above the national median. The state sales tax rate is 6%, with local sales taxes ranging up to an additional 2%. Iowa also has its own tax on inheritances, with rates ranging from 1% to 2% in 2024 for brothers, sisters, son-in-laws and daughter-in-laws. Meanwhile, inheritance tax rates reach up to 3% for aunts, uncles, nephews, nieces, brother-in-laws and sister-in-laws. . However, the state inheritance tax will completely phased out by 2025.

Is Social Security taxable in Iowa?

No, Social Security benefits are not taxed in Iowa.

Are other forms of retirement income taxable in Iowa?

Anyone 55 and older is exempt from paying state taxes on income from a 401(k), IRA, pension or annuity. Beneficiaries of inherited retirement plans may also qualify for a tax break, including surviving spouses or other survivors with an "insurable" interest in the person who died. 

Income Tax Brackets

Single Filers
Iowa Taxable IncomeRate
$0 - $6,0004.40%
$6,000 - $30,0004.82%
$30,000 - $75,0005.70%
$75,000+6.00%
Married, Filing Jointly
Iowa Taxable IncomeRate
$0 - $12,0004.40%
$12,000 - $60,0004.82%
$60,000 - $150,0005.70%
$150,000+6.00%
Married, Filing Separately
Iowa Taxable IncomeRate
$0 - $6,0004.40%
$6,000 - $30,0004.82%
$30,000 - $75,0005.70%
$75,000+6.00%
Head of Household
Iowa Taxable IncomeRate
$0 - $6,0004.40%
$6,000 - $30,0004.82%
$30,000 - $75,0005.70%
$75,000+6.00%

How high are property taxes in Iowa?

The median effective property tax rate in the Hawkeye State is 1.56%. But while rates are relatively high, the median property tax bill ($2,522) is less than the national median (2,869). That’s because home values in Iowa are quite a bit lower than the national median.

What is the Iowa homestead credit?

The homestead credit is a form of property tax relief available to all Iowa homeowners who occupy their property as a permanent residence. It is a subtraction of $4,850 from assessed value. The state also offers a homestead tax exemption for people 65 and older. For 2024, this exemption is worth $6,500 in addition to the basic homestead credit. 

Photo credit: ©iStock.com/lynngrae

How high are sales taxes in Iowa?

The state sales tax rate in Iowa is 6%, which is about average. All but 18 counties collect an additional local sales tax. So in practice, the average statewide rate is closer to 7%. Residents of Iowa benefit from sales tax exemptions on food, prescription drugs and some types of non-prescription medication.

What other Iowa taxes should I be concerned about?

Iowa does have a state inheritance tax. However, the law is scheduled to be fully repealed by Jan. 1, 2025. Tax rates will gradually decrease annually until then.

The Iowa inheritance tax does not apply to lineal descendants (children, grandchildren, great-grandchildren, etc.), but does apply to other types of relatives. Siblings who receive an inheritance will face rates ranging from 1% to 2%. The highest tax rate is applied to the portion of an inheritance that exceeds $150,000 in value. 

Nieces, nephews, aunts, uncles, cousins and all unrelated relatives face rates between 2% and 3%. The highest rate is applied to the portion of an inheritance that exceeds $100,000 in value.

There are two important considerations in relation to this inheritance tax. The first is that estates with a net value of less than $25,000 are not subject to the tax. The second is that, while Iowa does not have a gift tax, gifts made within the three years prior to the decedent’s death may be subject to the inheritance tax.