Go to Retiree Tax Map Iowa Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Mixed Tax Picture The Hawkeye State's top income tax rate is a steep 8.98%, but retirees can exclude up to $6,000 of retirement-plan distributions if single ($12,000 if married) from state income taxes. Social Security benefits are free of state income tax. State Sales Tax 6.0% state levy. Localities can add as much as 1%, and the average combined rate is 6.80%, according to the Tax Foundation. Income Tax Range Low: 0.36% (on up to $1,554 of taxable income) High: 8.98% (on taxable income over $69,930). Iowa also allows residents to deduct federal income tax from state taxable income. Effective income tax rate: 5.3%/individual, 7.6%/joint Social Security Benefits are not taxed. Exemptions for Other Retirement Income Taxpayers 55 or older or disabled (or a surviving spouse or a survivor having an insurable interest in an individual who would have qualified for the exclusion during the year) can exclude as much as $6,000 if single ($12,000 if married) of taxable income from a pension, annuity, distributions from an IRA or self-employed retirement plan, deferred compensation or other retirement-plan benefits. Out-of-state government pensions qualify for exemptions.IRAsQualifies for exemptions.401(k)s and Other Defined-Contribution Employer Retirement PlansQualifies for exemptions.Private PensionsQualifies for exemptions.Public PensionsQualifies for exemptions. Out-of-state government pensions also qualify for exemptions. Military benefits are exempt. Property Taxes The median property tax on Iowa's median home value of $132,800 is $1,986.Tax breaks for seniors:A property tax credit of up to $1,000 is available to residents age 65 or older. The program is limited to those with 2018 household income less than $22,855. Vehicle Taxes Vehicles are subject to a one-time registration fee of 5% of the sales price. Inheritance and Estate Taxes Iowa's inheritance tax ranges from 0% to 15%, depending on the amount of the inheritance and the relationship of the recipient to the decedent, with these exceptions: No tax is due on property left to a surviving spouse, stepchildren, lineal descendants (children, grandchildren, etc.) or lineal ascendants (parents, grandparents, etc.), and no tax is due if the estate’s net value is less than $25,000.