Iowa Tax Rates

Robert Bell, CPA, Partner

Starting January 1, 2025, Iowa’s individual income tax rate will be cut to a 3.8% flat rate for all taxpayers, a decrease from the top income tax rate of 5.7% in 2024. Governor Reynolds signed the flat tax law in May of 2024, which accelerated the tax reductions stemming from a 2022 policy. With this new lower rate, Iowa ranks sixth lowest nationally among states that implement an individual income tax. Iowans may begin to notice this tax cut immediately in their paychecks, as employers should be withholding less.

Further, Iowa was on a path to reduce the corporate income tax rate to a flat 5.5% for the 2025 tax year; however, this rate will remain the same as the 2024 tax tables. For the 2024 & 2025 tax year, the corporate rates in Iowa will be:

The Iowa legislature was set to gradually reduce the corporate income tax rate to a flat 5.5% if net corporate tax receipts exceeded $700 million for fiscal year 2024; however, the statutory threshold for recalculating the corporate rates was not met, coming in at $661 million. Corporate receipts will once again be evaluated for fiscal year 2025 (ending June 30), giving the flat 5.5% corporate rate another chance.