NEW Flat Tax System | 3.8% on All Income
Big News: Iowa eliminated its 9-bracket progressive system on January 1, 2025 via Senate File 2442 (passed May 2024)!
| State | Rate | Tax on $75k |
|---|---|---|
| Iowa | 3.8% | $2,850 |
| Minnesota | 5.35% - 9.85% | ~$4,250 |
| Wisconsin | 3.5% - 7.65% | ~$3,588 |
| Illinois | 4.95% flat | $3,713 |
| Nebraska | 2.46% - 5.2% | ~$3,450 |
| South Dakota | 0% | $0 |
Winner: Iowa now has the LOWEST income tax among taxing neighbors at 3.8%! Only South Dakota (0%) is lower.
Iowa's 3.8% flat tax took effect January 1, 2025 via Senate File 2442, enacted in May 2024. This replaced a 9-bracket system with a 5.7% top rate.
Yes, Iowa taxes Social Security benefits the same way as federal (up to 85% taxable). However, Iowa offers retirement income exclusions for taxpayers with income under certain thresholds.
Yes, at 3.8%. However, Iowa offers retirement income exclusions: $6,000 (2025) per person for qualifying retirement income, phasing up to full exclusion by 2026 for taxpayers meeting age/income requirements.