By Steve Dinnen
Happy new year, Iowans: Your government is celebrating by taking another step in its march toward a flat income tax.
For the taxes you’ll pay in 2026 for income earned in 2025, the new rate is 3.8%. That’s a one-third drop from the 5.7% rate in 2024.
The impact on W-2 wage earners will be felt immediately, as withholding for the new rate kicked in right on Jan. 1.
Tax watchers say Iowa now has the sixth lowest income tax in the country — not including the nine states, including neighboring South Dakota, that collect no income taxes at all.
The new change is a remarkable decrease from the top rate of 8.98% just three years ago. That placed Iowa among the top 10 highest taxing states. Back then, the state used nine separate brackets in its graduated income scale.
Iowa first implemented a state income tax rate in 1934, when it ranged from 1% to 5%. The top tax rate fell briefly below the current flat tax rate in 1953, when it was trimmed to 3.75%.
Will Iowa eliminate state income taxes? That’s a question for lawmakers. There are indications that lawmakers may tinker with property taxes in the upcoming legislative session.
