Iowa Tax and CPA Services: State, County and City Taxes

Iowa has moved from a long list of income tax brackets to one flat rate, cut its corporate tax in steps, excluded most retirement income for people 55 and older, and left local governments to raise money through property tax, a 1 percent local option sales tax and, in some places, a school district income surtax. This page explains the rules that matter to residents, retirees, business owners and employers. We help Iowa clients remotely from our Naperville, Illinois office.

Individual income tax

Iowa's rate schedule changed quickly. The Department of Revenue's rate tables show that the tax rate applied to nonresident pass-through members was 8.53 percent for 2022, 6 percent for 2023, 5.7 percent for 2024 and 3.8 percent for 2025 and later. The same 3.8 percent is the default rate plan administrators use when withholding Iowa tax from retirement payments to people who do not qualify for the exclusion. For residents, the practical result is a flat rate on Iowa net income after the state's adjustments.

Filing thresholds are based on net income: an individual with net income above $9,000 ($24,000 if 65 or older) must file, and married taxpayers with combined net income above $13,500 ($32,000 if 65 or older). Returns and tax are due the last day of the fourth month after the year ends, which is April 30, not April 15, for calendar-year filers.

Retirement income exclusion. A taxpayer qualifies if they are 55 or older on December 31 of the tax year, disabled, or a qualifying survivor. The exclusion covers governmental and other pension and retirement plans, including defined benefit and defined contribution plans, annuities, IRAs and employer plans. The Department also lists plans that do not qualify, so check the guidance for your specific distribution. For married couples, only the spouse who meets the conditions can use it, unless both qualify. A payer must withhold Iowa tax at the default rate for people who do not qualify; those who qualify can ask the plan administrator to stop withholding using Form IA W-4P.

Part-year residents and nonresidents with Iowa-source income file their own return. See our multi-state tax service.

Business taxes

For C corporations, Iowa's 2024 through 2027 rate is 5.5 percent on the first $100,000 of income and 7.1 percent above that. A 2022 law lets the rate drop further, toward a flat 5.5 percent, if net corporate receipts exceed $700 million, and the Department announces any reduction each year. Financial institutions pay a franchise tax at a rate that steps down to 3.5 percent for 2027 and later. See C corporation taxes for the federal side.

Pass-through entity tax (PTET). Under House File 352, signed May 11, 2023, a partnership or S corporation can elect to pay Iowa income tax at the entity level. The owners then receive a refundable credit for a percentage of the PTET paid. The election is voluntary, binding on the entity and all owners for that year, and must be made separately for each tax year. A single-member LLC that is disregarded cannot make its own election. Because of federal legislation (P.L. 119-21), the Department says the PTET election is no longer scheduled to expire. See SALT deduction and property taxes.

Pass-through entities must also remit composite tax on their nonresident members' Iowa-source income, at the highest Iowa rate for each member type.

Sales and use tax

Iowa's state sales and use tax rate is 6 percent. Counties that vote for it add a local option sales tax of 1 percent, and lodging has a 5 percent state rate with a local hotel and motel tax of up to 7 percent on top. The Department provides a Sales Tax Lookup tool, which shows the rate at an address. Iowa taxes a wide list of enumerated services as well as goods, and has detailed guidance for industries such as landscaping, lawn care, snow removal and tree services, medical clinics, and manufacturing and processing. Food delivery services are covered as marketplace facilitators. A Schedule C filer may need a sales tax permit. See our sales tax service.

Taxpayers who collect less than $1,200 in sales and use tax a year may file annually, and those who collect $1,200 or more file monthly.

Payroll in Iowa

• Withholding: every employer who maintains an office or transacts business in Iowa and must withhold federal income tax must also withhold Iowa tax, using the Department's tables, formulas or percentages. Deposit frequency (annual, quarterly, monthly or semimonthly) depends on the amount withheld. See state income tax withholding.
• Unemployment insurance: managed by Iowa Workforce Development, which publishes the annual taxable wage base and your rate; check the current notice. See state unemployment insurance.

Counties, school districts and property tax

Two Iowa local taxes catch people off guard. The first is the school district surtax: after a voter-approved program, a school district can charge up to 20 percent of state income tax liability, collected with the individual return, and the rate differs by district. The second is a county emergency services income surtax of up to 1 percent of state tax liability; the Department reports that only Appanoose County uses it. Property tax rates differ in each locality and combine county, city, school district and special levies. For comparison with the state to the east, see Illinois, and for the state to the south, Missouri.

How we can help

We prepare Iowa resident, part-year and nonresident returns, check retirement exclusions and school district surtax, evaluate the PTET election, and set up withholding. If you receive a notice from the Iowa Department of Revenue, see state tax notices and representation. Contact us to begin; this page is general information.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.