State-by-State Guide to Taxes on Retirees - Iowa
Tool | November 2019

State-by-State Guide to Taxes on Retirees

Iowa

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The Bottom Line
Flag of Iowa

Not Tax-Friendly

Which do you think is higher in Iowa: the corn or taxes? It might be taxes, thanks to above average income and property taxes in the state. One reason why income taxes are on the high end in the state is because over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax. The average property tax rate in the Hawkeye State is the 12th-highest in the nation. For a $400,000 home in the state, the owners can expect to pay about $6,711 per year in property taxes. That certainly doesn’t help homeowners in Iowa.

State Sales Tax

6.0% state levy. Localities can add as much as 1%, and the average combined rate is 6.82%, according to the Tax Foundation.

Income Tax Range

Low: 0.36% (on up to $1,598 of taxable income)

High: 8.98% (on taxable income over $71,910)

In 2019: Low: 0.33% (on up to $1,638 of taxable income) High: 8.53% (on taxable income over $73,710). Iowa also has local income surtaxes used for schools and emergency services; the average rate is 0.22%, according to the Tax Foundation.

Residents can deduct federal income taxes on their state return.

Effective tax rate: 4.43% for single filers, 7.03% for joint filers.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Taxpayers age 55 or older can exclude up to $6,000 ($12,000 for joint filers) of federally-taxed income from a pension, annuity, IRA, or other retirement plan.

Military pensions and Railroad Retirement benefits are fully exempt.

Property Taxes

In Iowa, residents pay an average of $1,678 in taxes per $100,000 of assessed home value.

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 $23,216.

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.

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