• About Us
  • Advertise
  • Contact Us
  • Privacy Policy
Saturday, March 25, 2023
The Iowa Torch
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
No Result
View All Result
  • Home
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion
The Iowa Torch
The Iowa Torch
No Result
View All Result
Home News

Iowa’s top income tax rate still higher than most states, but change is coming

While Iowa's top income tax rate of six percent is higher than most states, come 2026, Iowa will shift to a flat tax of 3.9 percent making it one of the lowest.

Mary StrokabyMary Stroka
March 1, 2023
in News
Reading Time: 3 mins read
Reynolds signs bill phasing in 3.9 percent flat tax

Gov. Kim Reynolds signs a bill creating a 3.9 percent flat tax into law at LBS in Des Moines, Iowa on March 1, 2022.
Photo by Shane Vander Hart

(The Center Square) – Iowa’s top marginal state individual income tax rate, as of January 3, is higher than that of most states.

RELATED POSTS

Report finds Iowa is fifth-worst in U.S. for hiring struggles

A note from our editor

Iowa’s elected officials respond to the death of Queen Elizabeth II

Like most states, Iowa has a graduated-rate income tax, according to a report from Tax Foundation. While its top rate, six percent, is lower than that of Minnesota (9.85 percent), Wisconsin (7.65 percent) and Nebraska (6.64 percent), South Dakota, Illinois and Missouri are far from the only states where the highest income earners pay a lower percentage.

South Dakota is one of the seven states with no income tax. While as of June 2017, Illinois taxpayers can’t claim personal exemption if their gross income exceeds $250,000 ($500,000 for married couples filing jointly), the state has a flat rate of 4.95 percent. Missouri’s top rate is 4.95 percent, which is for married or single filers who make more than $7,847.

Iowa legislators changed the state’s tax laws, however. As the report noted, Iowa enacted comprehensive tax reforms in 2018, 2021 and 2022. In 2022, the top bracket rate was 8.53%, which applied to households that earned more than $75,435.

“Many of these reforms will continue phasing in over the coming years,” the report said.

For example, starting this year, Iowa has four income tax rates. Iowa had had nine income tax brackets since at least 2015, according to the report.

ADVERTISEMENT

In 2023, the top rate dropped from 8.53 percent to six percent. Come 2026, Iowa will shift to a flat tax of 3.9 percent, so its rate is lower than those of most other states when that happens. The 3.9 percent rate is still higher than Indiana’s, Pennsylvania’s, North Dakota’s and Arizona’s rates in the report.

Effective tax year 2023, the state’s repealing the standard deduction and state deduction for federal taxes paid, broadening the base to help pay for rate reductions.

As of January 1, single filers pay 4.4 percent If they make up to $6,000, 4.82 percent if they make between $6,000 and $30,000, 5.70 percent if they make between $6,000 and $75,000, and six percent if they make more than $75,000. Married filing jointly brackets are doubled. The state doesn’t have a standard deduction. Personal exemptions are $40 for single filers, $80 for couples and $40 for a dependent.

The report excludes local income taxes, which 11 states have. Iowa’s average local income tax is 0.11 percent.

Arizona, Colorado, Idaho, Illinois, Kentucky, Michigan, Mississippi, New Hampshire, North Carolina, Pennsylvania, Utah and Washington currently have flat income tax, though New Hampshire’s flat tax solely applies to interest and dividends income and Washington only taxes capital gains income.

The highest marginal state individual income tax rates are those of California (13.3 percent), Hawaii (11 percent) and New York (10.9 percent). DC and New Jersey both have a 10.75 percent tax rate for the highest income earners.

Hawaii has 12 graduate-rate income tax brackets, which is the most of any state.

Tags: individual income taxTax Foundationtax policytax reform
ShareTweetShare
ADVERTISEMENT
Previous Post

Government reorganization bill advances in the Iowa Senate

Next Post

Hendrickson: Reining in Iowa’s administrative state

Mary Stroka

Mary Stroka

Mary Stoka is a freelance writer, editor, journalist, and public relations professional who lives in Chicago, Ill.

Related Posts

Iowa House approves 2.5 percent funding increase for school districts
Opinion

Hendrickson: Hands off! Taxpayer Relief Fund belongs to the taxpayers

March 7, 2023
Hendrickson: Fiscal Conservatism Works
Opinion

Hendrickson: Placing Iowa’s income tax on the road to elimination

February 6, 2023
Schultz: Governor Highlights Successes in Western Iowa
Opinion

Hendrickson: Governor Kim Reynolds has a mandate

November 15, 2022
Hendrickson & Williams: Governor Reynolds’ Tax Reform Ideas are Pro-Growth
Opinion

Hendrickson: Once again Reynolds proves that conservative budgeting pays off

September 28, 2022
tax documents on the table
Opinion

Sherman: Iowa consumers at risk of double taxation, thanks to Congress

September 7, 2022
Opinion

Hendrickson & Mozena: Time for tax credit reform

August 25, 2022
Next Post

Hendrickson: Reining in Iowa's administrative state

State of Iowa selects Odyssey to administer Education Savings Accounts program

Sign-Up For Our Daily Updates

Get The Iowa Torch right in your inbox!

Please wait...

Thank you for signing up!

Recommended Articles

Bill Requiring Full-Time In-Person Learning Option Advances in Iowa Senate

Bill Requiring Full-Time In-Person Learning Option Advances in Iowa Senate

January 25, 2021
Reynolds Defends Relaxing COVID-19 Mitigation Measures

After Severe Weather, Reynolds Issues Disaster Proclamation for 49 Counties

December 17, 2021
Video reveals Des Moines Metro school officials discussing skirting anti-CRT law

Video reveals Des Moines Metro school officials discussing skirting anti-CRT law

April 22, 2022

Popular Stories

  • elderly couple walking on a flower field

    Sherman: Iowa can fight back against the Biden Administration’s attack on retirees and families

    0 shares
    Share 0 Tweet 0
  • School restroom bill heads to Reynolds’ desk

    0 shares
    Share 0 Tweet 0
  • Ernst: Biden’s WOTUS whiplash.

    0 shares
    Share 0 Tweet 0
  • Horn: It’s time for employers get serious about Iowa’s untapped workforce

    0 shares
    Share 0 Tweet 0
  • Reynolds signs two bills addressing transgender children

    0 shares
    Share 0 Tweet 0

The Iowa Torch

The Iowa Torch​ is a for-profit, news organization that focuses on political news as it relates to Iowans

Categories

  • Education
  • Federal Government
  • Iowa History
  • Local Government
  • News
  • Opinion
  • Politics
  • State Government
  • Uncategorized
  • Uncategorized

Newsletter

Please wait...

Thank you for signing up!

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.

No Result
View All Result
  • Home
  • About Us
  • Advertise
  • Contact Us
  • State Government
  • Federal Government
  • Local Government
  • Politics
  • Education
  • Opinion

© 2022 The Iowa Torch, a publication of 4:15 Communications, LLC.