Iowa Income Tax Calculator

Iowa state tax quick facts Income tax: 0.36% - 8.98% Sales tax: 6% - 7% Property tax: 1.48% average effective rates Gas tax: 30.5 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 1.48%, Iowa’s property taxes are 14th highest in the country.

The state’s income tax system features one of the highest top rates, which at 8.98% ranks 5th among all states, but also one of the lowest bottom rates. Earners in Iowa’s bottom tax bracket pay a rate of just 0.36%, lower than any other state with an income tax. The sales tax in Iowa, meanwhile, ranges from 6% to 7% when including local rates, near the national average.

Iowa Income Tax

The Hawkeye State’s income tax has nine income brackets, with marginal rates between 0.36% and 8.98%. In addition to that state income tax, there are local income surtaxes collected by nearly every school district in Iowa. First, here are the tax brackets for the statewide income tax.

Those 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 also claim the Iowa standard deduction: $2,000 for single filers and married persons who are filing separately and $4,920 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 17%. 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.

Iowa Tax Credits

Iowa offers several types of tax credits to state taxpayers. The Earned Income Tax Credit is equal to 7% of the federal credit and is refundable, which means that even if you have no Iowa tax liability you may still claim it and receive a refund on it.

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 grades kindergarten through 12. The credit is 25% of the first $1,000 paid for tuition and books. If you are looking to get help filing your return, you can look into the best tax software.

Iowa Sales Tax

The base sales tax rate in Iowa is 6%, but nearly every county collects an additional “local optional” tax of 1%, meaning the actual rate collected in most places is 7%. Just six counties do not collect that additional tax: Dallas, Johnson, Osceola, Polk, Van Buren and Warren. In those six counties, there are some cities that have voted to collect the local option tax.

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 items 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 $1,900 a year. That is 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 1.48%, higher than all but 13 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.

Calculate Your Property Taxes: Iowa Property Tax Calculator

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, lineal descendants (children, step-children, grandchildren, great-grandchildren) and 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 inheritance over $100,000 facing the top rate.

Iowa Gasoline Tax

The gas tax in Iowa is 30.5 cents per gallon of regular fuel and 32.5 cents per gallon of diesel. Those are both just below the national averages.

Iowa Cigarette Tax

Iowa has the nation’s 28th highest cigarette tax, at $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

Excises taxes on alcohol in Iowa vary depending on the type of alcohol being sold. Liquor faces one of the highest rates in the country at $12.52 per gallon, while the tax on beer is much lower at 19 cents per gallon.

Photo credit: flickr

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.