Iowa income tax rate for 2025 and 2026: a flat 3.8%

Senate File 2442, signed in May 2024, replaced Iowa’s brackets with a single 3.8% rate for tax years from 2025 (Iowa Code 422.5). The Iowa Department of Revenue (IDR) confirms that in 2026 “all levels of taxable individual income will be subject to this rate”, and its 2026 withholding formula uses 3.8%. No law passed in 2026 changes it, and no further cut toward zero is scheduled. Some older IDR pages still mention a 3.9% rate for 2026 from an earlier law; SF 2442 replaced that.

A constitutional amendment on the November 3, 2026 ballot (SJR 11) would require a two-thirds vote of each chamber of the legislature to raise income tax rates or create a new income tax. It does not change the 3.8% rate.

Since 2023 an Iowa return starts from federal taxable income, line 15 of Form 1040, so your federal standard or itemized deduction is already taken out; Iowa has no separate standard deduction. Iowa also follows changes to federal tax law automatically unless Iowa law says otherwise. Iowa then makes its own adjustments, such as subtracting Social Security and retirement income, applies 3.8%, and subtracts exemption credits: $40 per person ($80 for a joint return or head of household), $20 more for each person 65 or older or blind, and $40 per dependent.

For example, a single filer with $60,000 of wages for 2025 has $44,250 of federal taxable income after the $15,750 standard deduction. The Iowa tax is 3.8% of that, $1,681.50, less the $40 credit: about $1,642, before any school district surtax.

Low-income filers owe nothing: for 2025, a single filer with income of $9,000 or less ($24,000 if 65 or older), or a joint filer at $13,500 or less ($32,000 if 65 or older). Married couples, heads of household and surviving spouses with modest income can use an alternate tax of 4.3% of income above $13,500 if that is lower.

Because Iowa starts from federal taxable income and follows federal law automatically, it takes the July 2025 federal deductions with it. IDR says Iowa “will conform with the federal tax provisions related to no tax on tips, no tax on overtime, no tax on car loan interest, and the new enhanced deduction for senior citizens”, for 2025 and 2026. So qualified tips (up to $25,000), overtime pay (up to $12,500, or $25,000 joint) and car loan interest (up to $10,000) deducted federally are not taxed by Iowa either, and the $6,000 senior deduction lowers Iowa taxable income too.

Two details: the senior deduction is added back when Iowa tests whether your income is low enough to owe no tax or use the alternate tax, and the 2026 Iowa W-4 has no allowance for tips, overtime or car loan interest, so your Iowa withholding may be higher than your final tax.

Iowa is one of the more generous states for retirees. All of these are subtractions on Schedule 1 of the IA 1040.

Credits come off the tax, and refundable ones are paid to you even if they exceed it.

Iowa school districts can add an income surtax, a percentage of your Iowa income tax, based on the district you lived in on December 31, whether or not you have children in school. For 2025 the rates run from 0% to 20% by district, set each year in IDR’s surtax table; six counties (Appanoose, Cass, Pocahontas, Sac, Shelby and Winnebago) add a 1% surtax for emergency medical services. For example, a 5% surtax on $1,642 of Iowa tax adds about $82. Nonresidents, and part-year residents who moved out, do not pay it.

Residents file Form IA 1040; nonresidents and part-year residents add Schedule IA 126, which taxes only Iowa-source income, and file if their Iowa-source net income is $1,000 or more. Your Iowa filing status must match your federal one. You need a completed federal return first, even if you do not have to file it.

Iowa returns are due April 30, not April 15: 2025 returns were due April 30, 2026, and the law sets the last day of the fourth month, so 2026 returns are due April 30, 2027. Iowa has no extension form and does not accept the federal extension; instead, if you have paid at least 90% of your tax by April 30, you automatically have until October 31 to file.

Check an Iowa refund with IDR’s “Where’s My Refund” at revenue.iowa.gov, using your Social Security number, the tax year and the refund amount; it covers original and amended returns filed in the last year. By phone: 515-281-3114 or 800-367-3388. Allow up to a week for an e-filed return to show up.

IDR says the anticipated time to process a refund is 30 days, and refunds averaged 30 days or less in the 2025 season. Paper returns, paper checks, errors, missing documents and returns picked for review take longer; amended returns can take 6 to 8 months.

Illinois is Iowa’s only reciprocal agreement. Wages and salary earned in Iowa by an Illinois resident are taxed only by Illinois: give your Iowa employer form 44-016 so it withholds Illinois tax instead. Iowa residents working in Illinois give their Illinois employer form IL-W-5-NR. The agreement covers wages only; Iowa still taxes an Illinois resident on other Iowa-source income, such as Iowa casino winnings or unemployment from an Iowa job, on Schedule IA 126.

You are an Iowa resident if Iowa is your domicile or you keep a permanent home here. Residents who pay income tax to another state, other than on wages covered by the Illinois agreement, claim the IA 130 credit.