Overview of Iowa Taxes
Iowa has a progressive tax system that features one of the country’s highest marginal rates and also one of the lowest bottom rates. The Hawkeye State has sales taxes near the national average while property taxes that are relatively high.
Number of Personal Exemptions
Your Income Taxes Breakdown
|Tax Type||Marginal |
|Total Income Taxes|
|Income After Taxes|
* These are the taxes owed for the 2018 - 2019 filing season.
Changes to Your Federal Income
Taxes Under the 2018 Tax Reform
- Your marginal federal income tax rate
- Your effective federal income tax rate
- Your federal income taxes
Total Estimated 2018 Tax Burden
Total Estimated Tax Burden $
Percent of income to taxes = %
- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Iowa state tax quick facts
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 14th highest in the country.
The state’s income tax system features one of the highest top rates, which at 8.98% ranks sixth among all states. But it also has 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.
Income Tax Brackets
|Iowa Taxable Income||Rate|
|$0 - $1,598||0.36%|
|$1,598 - $3,196||0.72%|
|$3,196 - $6,392||2.43%|
|$6,392 - $14,382||4.50%|
|$14,382 - $23,970||6.12%|
|$23,970 - $31,960||6.48%|
|$31,960 - $47,940||6.80%|
|$47,940 - $71,910||7.92%|
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 instead choose to claim the Iowa standard deduction: $2,030 for single filers and married persons who are filing separately, and $5,000 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.
School District Surtaxes
|School District||Surtax Rate|
|Adel Desoto Minburn||0%|
|Battle Creek-Ida Grove||1%|
|East Sac County||1%|
|Maple Valley-Anthon Oto||2%|
|South Central Calhoun||0%|
|West Central Valley||5%|
|West Delaware County||5%|
|West Des Moines||0%|
|Western Dubuque County||6%|
Iowa Tax Credits
Iowa offers several types of tax credits to state taxpayers. The Earned Income Tax Credit is equal to 15% 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 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 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: Clark, Dallas, Johnson, Osceola, Polk 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 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 $2,100 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 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 30.7 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 30th 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 the seventh highest rate in the country at $13.07 per gallon, while the tax on beer is much lower at 19 cents per gallon.
Photo credit: flickr
Places with the Lowest Tax Burden
Are you curious how your tax burden stacks up against others in your state? SmartAsset’s interactive map highlights the counties with the lowest tax burden. Scroll over any county in the state to learn about taxes in that specific area.
Where you live can have a big impact on both which types of taxes you have to pay each year and how much money you spend on them. SmartAsset calculated the amount of money a specific person would pay in income, sales, property and fuel taxes in each county in the country and ranked the lowest to highest tax burden.
To better compare income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a county by the household income less income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For property taxes, we compared the median property taxes paid in each county.
For fuel taxes, we first distributed statewide vehicle miles traveled down to the county level using the number of vehicles in each county. We then calculated the total number of licensed drivers within each county. The countywide miles were then distributed amongst the licensed drivers in the county, which gave us the miles driven per licensed driver. Using the nationwide average fuel economy, we calculated the average gallons of gas used per driver in each county and multiplied that by the fuel tax.
We then added the dollar amount for income, sales, property and fuel taxes to calculate a total tax burden. Finally, we created the Tax Burden Index in order to show how each county in the country compares to the county with the lowest tax burden (that is the county with a Tax Burden Index of 100).