Iowa Tax Calculator 2026

Iowa Income Tax

Iowa underwent a sweeping income tax reform beginning in 2023, consolidating its previous nine-bracket graduated system into a much simpler structure. For 2026, Iowa taxpayers face graduated rates ranging from 4.4% to 5.7%. The reform legislation, signed by Governor Kim Reynolds in 2022 (HF 2317), set a multi-year path toward lower and flatter rates. Iowa’s top marginal rate was once 8.53%, so the reduction to 5.7% represents a significant decrease for higher-income earners and improves the state’s competitiveness with neighboring states.

One of the most important aspects of Iowa’s tax reform is the treatment of retirement income. Beginning in 2023, Iowa fully exempts Social Security benefits from state income tax. Additionally, taxpayers aged 55 or older can exclude retirement income from pensions, 401(k) plans, and IRAs. This has made Iowa considerably more attractive for retirees compared to its previous system, which taxed most forms of retirement income.

Iowa uses federal adjusted gross income (AGI) as the starting point for state taxable income but applies its own set of deductions and adjustments. Iowa allows taxpayers to deduct federal income taxes paid on their state return, which is an increasingly rare provision among states. The standard deduction for single filers is approximately $2,210 and $5,450 for married couples filing jointly. Below are the current Iowa income tax brackets for single filers:

Taxable Income	Rate
$0 – $6,210	4.40%
$6,210 – $31,050	4.82%
$31,050 – $62,100	5.22%
Over $62,100	5.70%

Iowa Sales Tax

Iowa levies a 6% state sales tax on most tangible personal property and select services. In addition, cities and counties may impose a local option sales tax (LOST) of up to 1%, which requires voter approval. As of 2026, the vast majority of Iowa jurisdictions have adopted the local option tax, resulting in an average combined sales tax rate of approximately 6.94% statewide. Iowa exempts most grocery food items from sales tax, which provides relief to lower-income households.

Services such as dry cleaning, vehicle repair, and certain digital products are subject to Iowa sales tax. Prescription medications and medical devices are exempt. Iowa also participates in the Streamlined Sales Tax (SST) agreement, which simplifies compliance for businesses operating across state lines. The state requires remote sellers exceeding $100,000 in Iowa sales to collect and remit sales tax.

Iowa Property Tax

Iowa’s effective property tax rate averages approximately 1.52%, making it one of the higher property tax states in the Midwest and above the national average of roughly 1.1%. Property taxes are the primary revenue source for Iowa’s counties, cities, and school districts. Assessments are conducted at 100% of market value, but residential properties receive a “rollback” adjustment that reduces the taxable value to roughly 54–56% of assessed value. This rollback mechanism was designed to prevent property tax bills from rising as quickly as property values.

Iowa offers several property tax relief programs including the Homestead Tax Credit (which provides a flat reduction on the assessed value of owner-occupied homes), the Military Service Tax Exemption, and the Property Tax Credit for elderly and disabled homeowners with lower incomes. Agricultural land is assessed separately based on its productivity value rather than market value, which is significant given Iowa’s large farming economy.

Iowa Tax Reform & Retirement Benefits

Iowa’s 2022 tax reform (House File 2317) was one of the most comprehensive tax overhauls in the state’s history. Beyond reducing income tax rates and consolidating brackets, the legislation set a long-term goal of moving Iowa toward a flat tax. If state revenues meet certain triggers, rates could drop to a flat 3.9% in future years. This would make Iowa one of the most competitive income tax states in the Midwest.

The retirement income exemptions have been a major draw. Prior to 2023, Iowa taxed Social Security benefits for taxpayers above certain income thresholds and offered only limited deductions for pension and retirement account distributions. Now, with full exemptions for Social Security at all income levels and comprehensive exemptions for those 55 and older, Iowa has effectively eliminated state income tax on most retirement income. Combined with a relatively low cost of living in many Iowa communities, these changes have improved Iowa’s appeal to retirees considering relocation from higher-tax neighboring states like Minnesota and Illinois.

Iowa also repealed its inheritance tax as part of the reform, with full repeal effective in 2025. Previously, Iowa was one of only a handful of states that levied an inheritance tax on beneficiaries (as opposed to an estate tax on the decedent’s estate). The elimination of this tax simplifies estate planning for Iowa families and removes a potential barrier to wealth transfer across generations.

Iowa vs. Neighboring States

• Iowa vs. Minnesota: Minnesota’s top income tax rate of 9.85% is dramatically higher than Iowa’s 5.7% top rate. However, Minnesota has a lower average property tax rate (1.02%) compared to Iowa’s 1.52%. Minnesota also has a higher sales tax base rate of 6.875%.
• Iowa vs. Illinois: Illinois has a flat 4.95% income tax rate, which is lower than Iowa’s top rate but higher than Iowa’s lowest bracket. Illinois also has significantly higher property taxes in many areas, particularly in the Chicago metro region.
• Iowa vs. Nebraska: Nebraska’s graduated rates top out at 6.64%, higher than Iowa’s 5.7%. Nebraska has been pursuing its own tax reform to lower rates over time. Both states have above-average property taxes.
• Iowa vs. South Dakota: South Dakota has no state income tax, making it significantly cheaper for higher earners. However, South Dakota’s sales tax rate of 4.5% (plus local additions) and lower level of public services may be a trade-off for some residents.