A Guide to Iowa State Taxes
In Iowa, residents have to pay income, property, and sales taxes. You may also come across other taxes, such as inheritance tax and a reciprocal tax for people who work in Iowa but live out of state.
Iowa taxes are relatively straightforward if you understand the proper forms to file and how to calculate your income and locate your income tax bracket. Filing a tax return does require some care, and if you are an Iowa resident who meets income requirements, then you are required by law to file taxes.
If you fail to pay state taxes, you could end up having to pay interest or other penalties or fines. In extreme cases, the state could put a lien on your property, garnish your wages, or take money owed out of your tax refund until you have paid all your back taxes.
Also, if you do not file taxes in Iowa, you cannot collect refunds or credits due to you.
Iowa has some unique tax-related features. For example, for one weekend per year, Iowa businesses do not have to collect sales tax on purchases of some products that are less than $100.
Here is what you need to know about Iowa state taxes.
Table of Contents
Iowa Income Tax
Iowa residents pay state income tax in addition to federal income tax. The amount of money you pay depends on your income tax bracket. Currently, Iowa has nine tax brackets, though these will be reduced to four brackets for the 2023 tax year.
According to a release by the Iowa Department of Revenue, the current tax rates are as follows:
|Taxable Income||State Income Tax (Flat Tax + Tax Rate)|
|$0 to $1,638||$0 plus (0.33% multiplied by $0)|
|$1,638 to $3,276||$5.41 + (0.67% multiplied by $1,638)|
|$3,276 to $6,552||$16.38 + (2.25% multiplied by $3,276)|
|$6,552 to $14,742||$90.09 + (4.14% multiplied by $6,552)|
|$14,742 to $24,570||$429.16 + (5.63% multiplied by $14,742)|
|$24,570 to $32,760||$982.48 + (5.96% multiplied by $24,570)|
|$32,760 to $49,140||$1,470.60 + (6.25% multiplied by $32,760)|
|$49,140 to $73,710||$2,494.35 + (7.44% multiplied by $49,140)|
|Over $73,710||$4,322.36 + (8.53% multiplied by $73,710)|
State income tax returns are due by April 30. You must submit paperwork electronically by this date or have your returns postmarked by this date if you file by mail. If April 30 is on the weekend, tax documents are due the following Monday.
Currently, the standard deduction for filers in Iowa is $2,080 for single filers and married individuals who file separately. Married couples who file jointly have a standard deduction of $5,120.
Iowa Sales Tax
In Iowa, the standard sales tax is 6%. In addition to this standard tax, some jurisdictions collect additional sales tax. For example, many cities, such as Ames, have a local sales tax of 1% that gets added to the 6% state sales tax. Together, in these places, the total sales tax is 7%.
The Iowa Department of Revenue has a state-wide map and database that allows residents and visitors to search for the tax rate in the county, city, or town that they plan to visit. You can also find releases that announce new jurisdictions that have adopted a local tax option. In many cases, the local sales tax is 1%, which gets added to the standard sales tax for a total of 7%.
Iowa Property Tax
Iowa collects property taxes in six different categories:
Property taxes get levied based on an assessment of the real estate. Assessors look at the value of buildings, land, other structures, and improvements to come up with a taxable value. Iowa expects that all real estate property gets assessed every two years.
Iowa assists local and county governments with property taxes and ensures that local tax authorities abide by statewide laws. Local authorities do the actual assessment and tax collection, which happens every two years. County governments handle this process, but they work with towns, cities, hospitals, school districts, and other government-funded entities to ensure that their financial needs also get met by property taxes.
Because there are different factors associated with property taxes, there is not a uniform tax rate for every property in the state. Generally, real estate owners in larger cities pay a higher percentage. For example, in Des Moines, the average tax rate is $45.98 per $1,000 of value. That includes levies for schools and city improvements as well as general property taxes. In a smaller town such as Ames, the property tax rate is only $32.30 per $1,000 of assessed value.
According to USA Today, the average effective property tax rate in Iowa is 1.44%. This figure makes Iowa the 13th most expensive state for property taxes in the country.
However, you can also apply for tax credits related to property. For example, the homestead tax credit is for people who use their property as a primary residence. You can also apply for tax credits for some multi-unit properties for low-income residents and mobile or manufactured homes.
If someone gives property to you in their will, you may have to pay a tax on the value of your inheritance. In Iowa, the inheritance tax is based on each individual share of the estate. This type of tax is different from federal estate taxes, which cover the value of the entire estate at the time of the owner’s death. In Iowa, each heir pays taxes separately after receiving their inheritance.
On an inheritance tax return, you also list all inherited property and provide information about current debts or liens and other deductions. Each beneficiary must file a return.
Other Taxes in Iowa
Iowa has some other unique tax features. One, the reciprocal tax, deals with residents who live in a different state, but work in Iowa or work in Illinois but live in Iowa.
Iowa Tax-Free Weekend
Not all of Iowa’s tax rules are about paying taxes. For one weekend per year, at least, the state offers residents a chance to NOT pay taxes. Iowa’s Annual Sales Tax Holiday is on the first Friday and Saturday in August. Shoppers do not pay sales tax on everyday clothing and footwear, but they do pay tax on accessories or most sporting goods.
Iowa requires that retailers who are open on tax-free weekend participate in the event.
Iowa and Illinois have a reciprocal tax agreement that protects workers who live in one state but work in the other from double taxation. In simple terms, you pay taxes in the state where you reside. An Iowa resident who works in Illinois would pay income tax in Iowa.
Iowa residents who work in Illinois need to provide their employer with a special form so that the employer’s payroll manager can withhold the correct taxes from their paychecks. Reciprocity only applies to wages. Income from other sources gets taxed in the state where it was earned.
Filing Taxes in Iowa
Iowa state income tax returns are due April 30. If April 30 is on the weekend, your returns are due the following Monday. Also, if you file online, you must submit forms by April 30, but if you file by mail, your envelope needs to be postmarked by April 30.
When filing income tax returns in Iowa, most residents use Form IA 1040. You can also use Form 1040A if you plan to itemize deductions. The Iowa Department of Revenue has these forms and many other tax-related documents on their website.
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