Iowa now has just three income-tax brackets

By Steve Dinnen

Iowa has accelerated its march toward a flat income tax rate. In the meantime, the state has lowered rates it’s charging with its current graduated tax system.

For 2024, there will be just three brackets, charging rates of 4.4%, 4.82% or 5.7%, depending on how much income you make. That is simpler than the situation in 2022, when we had nine brackets ranging from 0.33% to 8.53%. That latter number gave Iowa the sixth-highest state tax rate in the nation, which Gov. Kim Reynolds took note of when she announced plans to ditch the brackets and move the state to a flat tax regimen.

The move toward a flat tax was originally slated for 2026, at 3.9%. Since legislation earlier this year switched gears a tad, Iowans now will face a flat rate of 3.8% in 2025 and beyond.

Iowa will join 12 other states that currently charge a flat rate, ranging from a high of 5.8% in Idaho to 2.5% in Arizona. And then we have nine states with no tax at all, including neighboring South Dakota.

As recently as 2023, Iowa had the nation’s 10th-highest tax burden (9.15%), which is a combination of income, sales and property taxes. Moving toward a flat tax will certainly bump the state down that list.

For more financial news delivered right to your inbox, sign up for our twice-a-month newsletter on giving, saving, investing and spending money, written by financial expert Steve Dinnen.

You May Also Like

Seniors Can Make Donations From IRAs Tax-Free

Above: Mike Banasiak, senior adviser at Iron Horse Wealth Management LLC in Johnston BY ...

As financial planning evolves, so does professiona …

The Financial Planning Association of Iowa meets every other month at the Des Moines ...

Even ‘Top Earners’ Might Be Unprepared …

BY ANNIE NOVA, CNBC We all know that low- and middle-income workers generally don’t ...