Compare taxes and see how much you save moving from Iowa to Illinois
Iowa has undergone one of the most significant tax transformations in the Midwest — cutting its income tax from a progressive system peaking at 8.53% to a flat 3.8% in 2025 (with further reductions toward 3.5% by 2026). Illinois maintains its 4.95% flat income tax, but is burdened by the Midwest's highest property taxes at ~2.08%. The income tax comparison clearly favours Iowa: at $100,000 income, Iowa saves $1,150 vs Illinois. On property taxes, Illinois's disadvantage is even more stark — on a $250,000 home, Illinois charges approximately $3,250 more per year than Iowa (~$5,200 vs ~$3,925). Iowa residents outside suburban Chicago and similar premium areas pay substantially less in total state and local taxes. The comparison is lopsided in Iowa's favour at most income and home value combinations.
Flat Rate (2025)
Consolidating to 3.8% flat in 2025 (from progressive up to 8.53%); property tax ~1.57%
Flat Rate
Flat 4.95%; highest Midwest property tax ~2.08%; no city income tax in Chicago
At $100,000 income:
That is $367/month back in your pocket!
| Income | IA Tax | IL Tax | Savings | 10-Year |
|---|---|---|---|---|
| $50,000 | $1,900 IA income tax (3.8%); ~$2,355 property ($150K × 1.57%) = ~$4,255 total | $2,475 IL income tax (4.95%); ~$3,120 property ($150K × 2.08%) = ~$5,595 total | IA saves ~$1,340 | $13,400 |
| $75,000 | $2,850 IA income tax; ~$3,140 property ($200K × 1.57%) = ~$5,990 total | $3,713 IL income tax; ~$4,160 property ($200K × 2.08%) = ~$7,873 total | IA saves ~$1,883 | $18,830 |
| $100,000 | $3,800 IA income tax; ~$3,925 property ($250K × 1.57%) = ~$7,725 total | $4,950 IL income tax; ~$5,200 property ($250K × 2.08%) = ~$10,150 total | IA saves ~$2,425 | $24,250 |
| $150,000 | $5,700 IA income tax; ~$5,495 property ($350K × 1.57%) = ~$11,195 total | $7,425 IL income tax; ~$7,280 property ($350K × 2.08%) = ~$14,705 total | IA saves ~$3,510 | $35,100 |
| $200,000 | $7,600 IA income tax; ~$7,065 property ($450K × 1.57%) = ~$14,665 total | $9,900 IL income tax; ~$9,360 property ($450K × 2.08%) = ~$19,260 total | IA saves ~$4,595 | $45,950 |
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Moving between Iowa and Illinois? Iowa's recent income tax transformation, partial-year returns, and retirement income rules need expert guidance. Get matched with a CPA who specialises in Midwest state moves.
Get Matched With a CPA →Yes — Iowa's income tax used to be among the highest in the Midwest. Iowa's old progressive structure had nine brackets reaching a 8.53% top rate (above $78,435 in 2022). Beginning with 2023 reforms signed by Governor Kim Reynolds, Iowa began consolidating to four brackets, then further to a flat rate. By 2025, Iowa reached a single flat 3.8% rate on all income. A further reduction to 3.5% is scheduled for 2026 with the possibility of additional cuts based on revenue performance. Iowa's transformation from ~8.53% top rate to a 3.5% flat rate is one of the most dramatic income tax reductions in any state in recent decades.
Illinois is exceptionally generous on retirement income — more so than Iowa. Illinois does NOT tax: Social Security benefits, pension income from public employee retirement systems (SERS, TRS, IMRF), private pensions and annuities, 401(k) and IRA distributions, and military retirement pay. This full retirement income exemption is embedded in the Illinois constitution and cannot easily be changed. Iowa does not tax Social Security if AGI is below $75,000 (single) or $100,000 (joint) and provides a pension exclusion for filers 55+, but the exclusion is less comprehensive than Illinois's. For retirees with significant pension income: Illinois may be cheaper despite its higher flat income tax rate.
The gap is enormous. Des Moines metro median home price approximately $230,000–250,000. Chicago suburban median (Naperville, Oak Park, Evanston): $380,000–550,000. At $250,000 in Des Moines: Iowa property tax approximately $3,925/year. Equivalent Chicago suburban $450,000 home: Illinois property tax approximately $9,360/year. The annual tax bill difference ($5,435) compounds massively over time. Total housing carrying costs (mortgage + property tax + insurance) are dramatically lower in Des Moines vs Chicago suburbs. Iowa's lower income tax rate and lower property tax add up to approximately $4,000–5,000/year in combined savings for a typical professional — in addition to lower purchase prices reducing the mortgage itself.
Iowa has become increasingly competitive for businesses following the income tax cuts. Iowa's corporate income tax is also being reduced — from a top rate of 8.98% to a flat 5.5% by 2026 (already reduced to 7.1% for 2024). Iowa has no franchise tax, no inventory tax, and the simplified income tax structure makes planning easier. The main limitation: Iowa's talent pool and professional services ecosystem is much smaller than Illinois's. For businesses requiring deep talent markets (tech, finance, consulting), Chicago's labour market is unmatched in the Midwest. For logistics, agriculture-tech, insurance, and manufacturing: Iowa's tax profile and central location are increasingly competitive.
Iowa's income tax reform legislation (SF 2442 and subsequent acts) has Iowa reducing to 3.8% flat in 2025 and 3.5% flat in 2026. There is additionally a revenue trigger mechanism — if Iowa's General Fund revenue exceeds specific targets, further automatic reductions occur. Governor Reynolds and the Republican-controlled legislature have stated a long-term goal of eliminating Iowa's income tax entirely, though no firm date is set. Iowa's trajectory mirrors what North Carolina has done — legislated annual cuts toward a very low or zero rate. By contrast, Illinois has no reform trajectory. The gap between Iowa and Illinois is widening.