Iowa State Income Tax in 2025: A Guide

Big changes for the Hawkeye state have arrived in 2025 with the introduction of a new, flat tax of 3.8%. This flat tax replaced the prior graduated tax rate system and applies to all residents and nonresidents with taxable income in Iowa.

This represents significant tax savings for Iowa taxpayers of all income levels, though it is more pronounced for those with higher incomes.  

*Note you are still responsible for federal taxes if you meet the IRS income filing threshold. This article addresses state-specific taxes only.

Iowa state income tax rates

Starting in 2025, Iowa has eliminated income tax rates and will only have a flat tax of 3.8%. Therefore, all taxable income, regardless of income level, will calculate state taxes based upon the flat tax rate.

What is the standard deduction in Iowa?

The standard deduction reduces the amount of income subject to tax, which makes it valuable for taxpayers who don’t itemize deductions. In Iowa, the 2025 standard deduction mirrors the federal standard deduction which varies based on filing status: 

• Single or married filing separately: $15,750 
• Head of household: $23,625 
• Married filing jointly or surviving spouse : $31,500

Taxpayers use the standard deduction for many reasons. It simplifies tax filing and helps avoid the need to itemize expenses (or keep receipts). It’s generally beneficial to take the standard deduction if your itemized deductions don’t exceed the standard deduction amount.

Who has to file Iowa state income tax?

If you lived in Iowa or earned income from Iowa sources, you may need to file an Iowa state income tax return. Filing requirements depend on your gross income, filing status, and residency status.  

Like many states, Iowa recognizes three types of residency for tax purposes: resident, part-year resident, and nonresident. 

Residency status	Definition	How Iowa taxes income
Resident	You lived in Iowa for the entire tax year, or Iowa is your permanent home.	Iowa taxes all your income.
Part-year resident	You lived in Iowa for part of the tax year, but also moved in or out of the state.	Iowa taxes income while a resident, as well as any Iowa-sourced income when not a resident.
Nonresident	You lived outside Iowa but had income from Iowa sources.	Iowa taxes only Iowa-sourced income.

Source: Iowa Department of Revenue

Other income tax considerations in Iowa

In addition to standard income taxes, some Iowa residents may face taxes on specific types of income. Below is a summary of typical income categories and how Iowa taxes them: 

• Retirement and pension income tax: Iowa excludes most retirement income, including pensions and IRAs, for taxpayers who are 55 or older. Lump-sum distributions could trigger an Iowa Lump-Sum Tax.  
• Investment income tax: Iowa provides a deduction for certain qualifying capital gains but taxes most investment income. 
• Social Security income tax: Iowa doesn’t tax Social Security benefits. While the state excludes their income from tax calculations, some benefits may be treated as income when determining eligibility for the health insurance deduction. 
• Military income tax: Military active-duty pay and retirement pay are fully exempt from Iowa state income taxes. 

Common Iowa state tax credits

Iowa offers various tax credits to help residents further reduce their state income tax liability. The table below offers a summary of several prominent credits: 

Tax credit	Description	Amount
Earned Income Tax Credit (EITC)	Matches a percentage of the federal EITC to assist low- and moderate-income workers.	Up to 15% of federal EITC; maximum federal credit is $8,046 for the 2025tax year.
Child and Dependent Care Tax Credit	Reduces costs for child or dependent care for qualifying individuals.	Up to 75% of the federal credit; the maximum allowable federal expenses claimed are  $6,000 for the 2025 tax year.
Farm to Food Donation Tax Credit	Rewards farmers donating self-produced food commodities to food banks or food assistance programs.	The lesser of $5,000 or 15% of the value according to federal guidelines for charitable contributions of food..
Tuition and Textbook Credit	Helps parents cover costs for K-12 tuition and educational expenses.	25% of up to $2,000 in qualified expenses per child.

For a comprehensive list of credits and exemptions, visit the Iowa Department of Revenue website. 

How to file Iowa state income tax

Navigating Iowa’s tax brackets, credits, and deductions can be a challenge, but you don’t have to manage your 2025 taxes alone. TurboTax is here to help. Whether you want to do your taxes yourself, get professional tax advice, or connect with a local verified tax pro in Iowa, we’ll help you handle it all. We can even help with your Iowa tax return so you can file with confidence.

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