Ranking and TaxScore #46

Important Tax Facts: 

-The State of Iowa has both Corporate income tax and personal income tax with maximum rates of 8.50% and 8.53%, respectively. Iowa is also one of the few states that also has an inheritance tax. Read more below.

8.53%*

State Income Tax

State
Income
Tax

12.00%

Cost of Setting Up A Business

state
business
tax

HIGH

Property
Taxes

6.94%

STATE & lOCAL
Sales Tax

State Income Taxes in Iowa

The state of Iowa does have an individual income tax. Like most states with income tax, it is calculated on a marginal scale, with nine (9) tax brackets. They range from 0.33% to 8.53%. The highest bracket of 8.53% starts for income greater than $73,710.

Local income tax* – depending on the county or school district you are zoned for, you may be subject to an additional Local Income tax. For instance, if you live, work, or conduct business in Appanoose County, you are subject to an additional 1.00 local surcharge tax. The average local income tax rate is 0.11% of your adjusted gross income.

State Business Taxes in Iowa

The state of Iowa has a Corporate Tax rate with four (4) tax brackets. They range from 6.00% to 12.00%. The highest tax bracket starts at only $250,000.  Corporate Tax is only assessed on C Corporation. Other flow-thru entities, such as S-Corps, LLCs and LLPs are not subject to the Corporate Tax, however they are subject to the owner’s individual income tax rate.

State and Local Sales Taxes in Iowa

Like many states, Iowa has multiple sales tax rates. One at the state level and another at the local level. The state rate is 6.00% the average local rate is 0.94% (total average rate for Iowa Sales Tax is 6.94%).

Property Taxes in Iowa

The average property tax rate for residential property in the state of Iowa is 1.50%, which is a high property tax as a percentage of home value.

Inheritance Taxes in Iowa

Iowa is one of only six (6) states that has an inheritance tax. Depending on the type (or class) of beneficiary you could be assessed inheritance tax. If you are a direct beneficiary (spouse, parents, grandparents, children, grandchildren, etc.) or a charity you will owe no tax. However, the following beneficiaries will owe tax:

  • Siblings and some in-laws – 5% – 10%
  • Uncles, aunts, nephews, cousins – 10% – 15%
  • Firms, Corporations, For-Profit entities% – 15%
  • Charities – 10%
  • Unknown heirs – 5%
  • Link: Iowa’s Official Rate Schedule
 

State Payroll taxes in Iowa

Payroll (Unemployment Insurance) taxes are paid by business on the behalf of their employees to fund unemployment insurance to the state. It consists of multiple factors. Below is an outline of the most common ones in Iowa –

  • Wage BaseIowa’s wage base is $31,600 (high wage base)
  • New Employers – UI Contribution Tax is 1.00% for all new employers.
  • New Employers in Construction – UI Contribution Tax is 7.50% for new employers in construction
  • UI Rates – range from 0.00% to 9.00%

Iowa Business Entities - LLCs

Iowa in an inexpensive cost of opening an LLC. Here are some important facts:

  • Iowa’s LLC fee is bi-annual, and is $45.
  • When you register with the state, you pay a one time fee of $50
  • Secretary of State of Iowa – click here
  • If you would like help setting up your LLC, we recommend using IncFile.com. They are simple and easy to use.

State #45

State #47