What is the Iowa state income tax rate in 2026?
Iowa taxes income at a flat 3.80% in 2026. Example: a married couple, both 70, with $40,000 of Social Security, a $30,000 private pension and $30,000 of IRA withdrawals ($100,000 in all; the pension and IRA money split evenly between them) owes $0 of Iowa income tax (0.0% of their income) and $5,087 of federal tax; a single 62-year-old with $24,000 of Social Security, an $18,000 pension and $18,000 of IRA withdrawals ($60,000 in all) owes $0 to Iowa and $4,111 federal. The schedule, how Iowa treats each kind of retirement income, and its local taxes follow.
How Iowa taxes retirement income in 2026
| Standard deduction or personal exemption | $16,100 single, $32,200 married filing jointly, $24,150 head of household. The standard deduction includes $2,050 more for a single or head-of-household filer 65 or older, and $1,650 more for each spouse 65 or older on a married return. Nonrefundable credit of $40 per exemption (one for single, two for MFJ, 2 for head of household). (Iowa Department of Revenue; rules) |
|---|---|
| Social Security | Social Security benefits are fully exempt: none of the federally taxable amount enters the state base. (Iowa Legislature; rules) |
| Pensions, annuities and IRA/401(k) withdrawals | Pension, annuity and IRA/401(k) distributions are fully excluded at age 55 or older; below that age they are taxed as ordinary income. No dollar cap and no income limit. (Iowa Department of Revenue; rules) |
| Age 65 and older | The federal senior deduction is also taken against the state base: $6,000 for each taxpayer 65 or older, each reduced by 6% of income above $75,000 (single and head of household) or $150,000 (MFJ). An additional nonrefundable credit of $20 per taxpayer at age 65 or older. (Internal Revenue Service; rules) |
| Capital gains | Net long-term gain is taxed as ordinary income. Short-term gains are ordinary income. (Iowa Department of Revenue; rules) |
Local income taxes in Iowa:
- Iowa school districts (738) add an income surtax of 0% to 20% of the Iowa income tax (the latest published rates are for 2025); because it is a share of the state tax, it reaches retirement income only as far as Iowa taxes it. (Iowa Department of Revenue)
Your whole 2026 return in Iowa, federal and state together, ends in a refund or an amount owed: 2026 tax return calculator (free) → What five typical retiree households owe or get back in Iowa and every other state: the 2026 tax return study.
Figures for 2026 from QuantCalc’s open tax engine (federal 2.6.1, state 1.28.0), for a full-year resident. An estimate, not tax advice: credits, itemized deductions and rules this page does not ask about change a real return. Every Iowa rule with its official sources: Iowa rules and sources.
In QuantCalc's 51-state planner study — one married couple, both 60, $2M, $80,000 a year to spend after tax, 10,000 paths per jurisdiction — the median path in Iowa pays $162,597 of federal and state income tax and Medicare IRMAA over 30 years, with no Iowa state income tax in any year. That ranks #1 of 51 (tied with 15 others) by lifetime tax (1 = lowest). The plan succeeds in 84.05% of paths. State tax is part of the optimization here — the playbook below shows the federal-state-ACA stack.
The IA verdict
For a retiree planning withdrawals in 2026, Iowa is broadly retirement-tax-friendly. One flat bracket that fully exempts retirement income from age 55 under the 2022 reform.
Iowa exempts qualified retirement income from age 55 — pensions, 401(k) and IRA distributions alike — so a withdrawal costs $0 in state income tax, and a conversion out of one of those accounts is treated the same way. The binding constraints on a Iowa conversion ladder are the federal bracket, the 400% FPL ACA cliff and the IRMAA two-year lookback, not the state rate.
Worked example: $30k Roth conversion in Iowa
Consider a married couple age 58 in Iowa with $75,000 of wages (their MAGI), both on ACA Marketplace coverage. They want to convert $30,000 from a traditional IRA to a Roth. The Iowa state tax on that conversion is $0 — Iowa exempts qualified retirement income, and a conversion is a distribution from a qualified account. Federal income tax adds another $3,600 — the whole conversion is taxed in the federal 12% bracket. And because the conversion pushes their MAGI to $105,000 — over the 400% FPL cliff of $84,600 — they lose their full ACA premium tax credit, $16,503 a year at Iowa's average benchmark Silver premium. Total cost of the $30,000 conversion: $20,103, or an effective 67.0% marginal rate. Each Iowa tax figure for a conversion on this page is QuantCalc's state tax engine run on the couple's whole 2026 Iowa return twice, without the conversion and with it, with every amount split evenly between the two spouses, so Iowa's own brackets, deductions, exemptions and credits are all applied. The federal-state-ACA stack matters in Iowa.
Cost breakdown
| Component | Amount |
|---|---|
| Federal income tax (12% bracket) | $3,600 |
| Iowa state income tax | $0 |
| ACA premium tax credit clawback | $16,503 |
| Total cost on $30,000 conversion | $20,103 (67.0% effective) |
Scenario B (friendly): $50k post-65 conversion in Iowa
A married Iowa couple age 67, both on Medicare, with $40K pension income converts $50,000 in a single year. State tax owed: $0 — Iowa exempts qualified retirement income, and a conversion is a distribution from a qualified account. Federal income tax added: $4,607 ($7,500 of the added income fills deductions their pension left unused and the rest is taxed in the federal 10%–12% brackets). No ACA clawback (on Medicare). Total: $4,607, or 9.2% effective. The post-65 conversion window is where an Iowa ladder is cheapest.
What the planner's Monte Carlo says about Iowa
QuantCalc Research ran one married couple through QuantCalc's retirement planner in each of the 51 jurisdictions: both 60, $2,000,000 ($1,400,000 traditional, $600,000 Roth), a 60/40 portfolio, $80,000 a year to spend after tax for 30 years, no Social Security, 10,000 paths each. The planner's federal and state tax engines price every year, and it picks the withdrawals and Roth conversions. Here is Iowa beside the lowest- and highest-tax results:
| Metric | Iowa | No state tax (16 jurisdictions) | Oregon (highest) |
|---|---|---|---|
| Median lifetime tax, federal + state + IRMAA (30y) | $162,597 | $162,597 | $309,718 |
| State income tax (30y, sum of yearly medians) | $0 | $0 | $146,914 |
| State income tax in the first year (age 60) | $0 | $0 | $5,838 |
| 30-year success rate | 84.05% | 84.05% | 80.61% |
| Median balance at 90 | $2,153,150 | $2,153,150 | $1,801,272 |
| Rank by lifetime tax (of 51, 1 = lowest) | #1 | #1 | #51 |
Across all 51 jurisdictions the success rate runs from 80.61% to 84.05%: for this couple the state changes the tax bill far more than the odds of the money lasting. Dollars are today's dollars. Source: QuantCalc 51-State Retirement Monte Carlo (v2026.3, re-run 2026-10-12) — 510,000 planner paths, methodology and dataset released CC-BY-4.0. Every jurisdiction's row uses the same household and the same market paths; only the state of residence changes.
How Iowa treats capital gains in retirement
Iowa taxes net capital gains, short- and long-term, as ordinary income at its flat 3.80% rate in 2026. Iowa's own capital-gain deduction now covers only a few kinds of sale: farm real property held ten years by someone who materially participated in farming for ten years, or sold to a relative; certain breeding livestock sold by farmers or retired farmers; and a once-in-a-lifetime election for stock of a qualified Iowa corporation held ten years by an employee-owner who acquired it through employment. Gains on ordinary stocks, funds and non-farm property get no Iowa break. (Iowa Code §422.7)
Why the ACA cliff hits hard in Iowa
The 400% federal-poverty-level cliff is federal, not state-specific — but its dollar impact depends on the benchmark Silver-plan premium in your county. Iowa's Marketplace pricing and your household composition determine the size of the subsidy at risk. A couple aged 58 with MAGI of exactly $84,600 still has $15,547 a year of premium tax credit at Iowa's average benchmark Silver premium, and all of it is on the line. With the 2021–2025 enhanced credit expired, $1 of additional MAGI above 400% FPL eliminates the entire credit.
For 2026 the 400% FPL threshold is:
Roth conversion strategy for Iowa
The IA-specific playbook depends on tier:
- Identify your cliff distance. Compute MAGI from all income sources (wages, capital gains, interest, dividends, traditional withdrawals). Find your headroom under 400% FPL. Use the live cliff widget above for a quick check.
- Stay under the cliff if you can. In Iowa at 3.80%, the marginal cost of going over the cliff is federal tax + state tax + full PTC clawback. The break-even conversion size is smaller than in tax-free states.
- If you must go over, convert big. Once you've crossed the cliff, additional conversion dollars only cost federal + state tax (no incremental PTC loss). A "rip the bandage" conversion year can be efficient if you have many traditional dollars to move.
- Coordinate with capital gains and the 0% LTCG bracket. Iowa taxes net capital gains, short- and long-term, as ordinary income at its flat 3.80% rate in 2026. Iowa's own capital-gain deduction now covers only a few kinds of sale: farm real property held ten years by someone who materially participated in farming for ten years, or sold to a relative; certain breeding livestock sold by farmers or retired farmers; and a once-in-a-lifetime election for stock of a qualified Iowa corporation held ten years by an employee-owner who acquired it through employment. Gains on ordinary stocks, funds and non-farm property get no Iowa break. (Iowa Code §422.7)
- Plan ahead for IRMAA. The IRMAA Medicare premium surcharge has a 2-year lookback. A Iowa resident in their early 60s converting today will see IRMAA implications at 65. See RMD + IRMAA calculator for the lookback math.
State tax basics for Iowa retirees
| Question | Iowa |
|---|---|
| State income tax | 3.80% top marginal |
| Number of brackets | 1 |
| Social Security taxed | No |
| 401(k) / Traditional IRA taxed | No / exempt |
| Retirement-income exclusion (couple) | Full exemption |
| Roth conversion draws that exclusion | Not applicable |
| State estate / inheritance tax | No |
| Retirement-friendliness tier | friendly |
| Notable feature | one flat bracket that fully exempts retirement income from age 55 under the 2022 reform |
| 30-yr planner success rate | 84.05% |
| Median 30-yr tax, federal + state + IRMAA (rank) | $162,597 (#1/51) |
Model your full Iowa retirement scenario
Free Monte Carlo (100 paths per run; 10,000 with PRO) with state-specific tax engine, ACA cliff, Roth conversion optimizer, IRMAA lookback — free, no signup.
Run a free simulation →What a year-end move does to your Iowa and federal tax in 2026
Each move changes three bills at once: the federal return, the Iowa return and, for anyone on Medicare, the IRMAA surcharge the 2026 income sets for 2028. Example: a married couple, both 72, with a $40,000 pension, $50,000 of Social Security, a $30,000 IRA withdrawal and $10,000 of long-term gains already realized in 2026, the pension, the IRA money and the conversion split evenly between them on the state return. Each row is that year with one move made, against the same year without it (negative = less tax).
| Move (by December 31, 2026) | Federal tax | Iowa tax | IRMAA in 2028 |
|---|---|---|---|
| Convert $25,000 to a Roth IRA | $3,165 | $0 | $0 |
| Send $10,000 of the IRA withdrawal to charity as a QCD | −$1,200 | $0 | $0 |
| Harvest a $5,000 loss against the year's gains | $0 | $0 | $0 |
An estimate from QuantCalc’s open tax engine (federal 2.6.1, state 1.28.0) for the 2026 tax year. Not tax advice: your return depends on facts this page does not ask about, so check a move with your tax preparer or custodian before acting. IRMAA uses the 2026 tiers for two people on Medicare; the 2028 tiers are not published yet. How the engine computes each line, with its official source: federal, Iowa.
Related calculators and reading
- All-states retirement tax comparison — see Iowa alongside the other 50 jurisdictions.
- Iowa minimum wage 2026 — the hourly rate, scheduled increases and take-home pay after tax, from the official sources.
- State Retirement Tax Data 2026 — the per-jurisdiction rate, exclusion and Social Security figures behind this page, as CSV and JSON.
- ACA Subsidy Cliff Optimizer — find the largest Roth conversion that keeps you under 400% FPL.
- Roth Conversion Optimizer — bracket-fill vs. fixed-amount strategy comparison.
- RMD + IRMAA Calculator — Medicare premium surcharge based on 2-year-old MAGI.
- Safe Withdrawal Rate Calculator — sequence-of-returns-aware withdrawal planning.
- Research: 51-State 30-year Monte Carlo (2026) — full ranking and dataset.
- Research: Monte Carlo ACA Cliff 2026 — 80,000-path study of the cliff cost.
FAQ
What is the Iowa state income tax rate in 2026?
Iowa taxes income at a flat 3.80% in 2026. The full schedule and Iowa's deductions are on this page (Iowa Department of Revenue; rules).
How much state income tax does a retiree pay in Iowa?
It depends on the kind of income. In 2026, a married couple, both 70, with $40,000 of Social Security, a $30,000 private pension and $30,000 of IRA withdrawals ($100,000 in all; the pension and IRA money split evenly between them) owes $0 of Iowa tax, and a single 62-year-old with $24,000 of Social Security, an $18,000 pension and $18,000 of IRA withdrawals ($60,000 in all) owes $0. Federal tax comes on top: $5,087 and $4,111.
Does Iowa tax Social Security benefits?
No. Social Security benefits are fully exempt: none of the federally taxable amount enters the state base. (Iowa Legislature; rules)
Does Iowa tax pensions, 401(k) and IRA withdrawals?
Pension, annuity and IRA/401(k) distributions are fully excluded at age 55 or older; below that age they are taxed as ordinary income. No dollar cap and no income limit. (Iowa Department of Revenue; rules)
Does Iowa have local income taxes?
Yes. Iowa school districts (738) add an income surtax of 0% to 20% of the Iowa income tax (the latest published rates are for 2025); because it is a share of the state tax, it reaches retirement income only as far as Iowa taxes it. (Iowa Department of Revenue)
Does Iowa tax Roth conversions?
Not for the couple in the worked example: a $30,000 conversion by a couple aged 58 with $75,000 of wages adds $0 of Iowa tax — Iowa exempts qualified retirement income, and a conversion is a distribution from a qualified account. The conversion is still a federal taxable event and can still trigger the 400% FPL ACA premium-tax-credit cliff. Each Iowa tax figure for a conversion on this page is QuantCalc's state tax engine run on the couple's whole 2026 Iowa return twice, without the conversion and with it, with every amount split evenly between the two spouses, so Iowa's own brackets, deductions, exemptions and credits are all applied.
What is Iowa's 30-year Monte Carlo retirement success rate?
In QuantCalc's 51-state planner study, one married couple (both 60, $2M, 60/40, $80,000 a year to spend after tax, 10,000 paths) succeeds in 84.05% of paths in Iowa; across all 51 jurisdictions the rate runs from 80.61% to 84.05%. The median path pays $162,597 of federal and state income tax and IRMAA over 30 years, $0 of it Iowa state income tax.
What is the ACA cliff in Iowa for 2026?
The ACA premium-tax-credit cliff is a federal threshold, not state-specific. For a household of two in 2026, it sits at 400% of the federal poverty level — $84,600. Crossing it by even $1 of MAGI eliminates the full subsidy now that the 2021-2025 enhanced credit has expired.
Is Iowa a good state to retire for tax purposes?
Iowa is broadly retirement-tax-friendly. One flat bracket that fully exempts retirement income from age 55 under the 2022 reform. In our planner study it ranks #1 of 51 (tied with 15 others) by median lifetime tax (1 = lowest).
Does Iowa have a state estate or inheritance tax?
No — Iowa does not impose a state-level estate or inheritance tax.
How does Iowa tax capital gains?
Iowa taxes net capital gains, short- and long-term, as ordinary income at its flat 3.80% rate in 2026. Iowa's own capital-gain deduction now covers only a few kinds of sale: farm real property held ten years by someone who materially participated in farming for ten years, or sold to a relative; certain breeding livestock sold by farmers or retired farmers; and a once-in-a-lifetime election for stock of a qualified Iowa corporation held ten years by an employee-owner who acquired it through employment. Gains on ordinary stocks, funds and non-farm property get no Iowa break. (Iowa Code §422.7)
Last updated 2026-11-05. State income tax figures reflect the 2026 schedule published by Iowa's tax authority. ACA poverty-level figures: the 2025 HHS poverty guidelines for the 48 contiguous states and DC ($15,650 for one person, plus $5,500 for each additional person; 90 FR 5917), which set 2026 Marketplace coverage. Premium tax credit estimates use Iowa's average benchmark Silver premium. Monte Carlo numbers from the QuantCalc 51-state planner study (v2026.3, re-run 2026-10-12, CC-BY-4.0). This page is educational. Not tax, legal, or financial advice — consult a qualified advisor.