Iowa currently has four income tax brackets for corporations, with a top marginal rate of 9.8%. This includes money received from pensions, 401(k)s, individual retirement accounts, annuities, deferred compensation plans, and similar retirement programs for people who are 55 or older.Īlso, beginning in 2023, farmers 55 or older, who have farmed for at least ten years and are retired, can choose to eliminate the tax on cash rent and crop share, or they can choose a one-time exclusion of net capital gains from the sale of farmland.Ī tax advisor should be consulted to determine the exact implications of these changes for individual retirees. Iowa's income tax on retirement income will be repealed in 2023. 2025: Two tax brackets with a top marginal rate of 4.82%.2024: Three tax brackets with a top marginal rate of 5.70%.2023: Four tax brackets with a top marginal rate of 6.00%.Starting next year, the number of brackets and top marginal rates will be reduced until there is one flat rate of 3.90%. So, when will you start saving? Some cuts begin next year and others will take effect over the next four years.Ĭurrently, Iowa has nine tax brackets with a top marginal rate of 8.53%. Iowans will save almost $2 billion when all cuts are fully implemented. The historic tax reform signed by Governor Kim Reynolds last week is the third major tax reform since 2018. He ended his message with this great observation: The purpose of Vokal's email was to encourage Nebraska lawmakers to improve their tax code. If Nebraska does nothing, a person paying our top tax rate will pay about 75% more tax on every extra dollar they earn compared to their peer in Iowa." This will give our next-door neighbors what would currently be the 4th lowest income tax among states that have one. Meaning, if you have a pension, IRA, or deferred compensation plan, Iowa will be as favorable to you as any state with no individual income tax.Īnd now, legislation signed last week will reduce Iowa’s personal and corporate income taxes each year through 2026, when the state is expected to fully adopt a new 3.9% flat personal income tax. Since the last time Nebraska beat Iowa in football in 2014, the Hawkeye State has begun to transform its tax system from one of the worst, to one of the best.Īt that time, Iowa had one of the highest personal and corporate income taxes in the country, and was among the last states levying an inheritance tax, along with Nebraska.īut starting next year in 2023, all retirement income for Iowans age 55 and older will be tax-free. Some of our similarities are changing, though. Nebraskans and Iowans often share family roots or even work across state lines. Given the proximity of Nebraska’s largest cities, Iowa is usually considered our most comparable neighbor.Īnd our states do have a lot in common. In an email to its members, Platte Institute CEO Jim Vokal wrote: Our colleagues in Nebraska had an interesting take on Iowa's recent tax reform success. That may not be everything, but in this kind of economy, it sure is something to a lot of people." "Iowa wants more Americans to know it’s a good financial decision to be an Iowan.
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