Tax year 2023 is the first time taxpayers in Iowa will enjoy savings from this legislation. Some Iowans may see withholding adjustments on their paychecks, while others may not notice changes until next year when they begin to work on their 2023 tax returns.
Happy New Year… and happy lower taxes! Iowa made a big splash in the tax world last year by enacting what some have referred to as the “gold standard” for tax reform.
Here is what you need to know:
For 2023, Iowa’s income tax has only four tax brackets, with a reduction in each rate as follows, including the top rate dropping from 8.53% to 6.00%:
Married filing jointly:
$0 > $12,000 –> 4.40%
$12,000 > $60,000 –> 4.82%
$60,000 > $150,000 –> 5.70%
$150,000+ –> 6.00%
All other filing types:
$0 > $6,000 –> 4.40%
$6,000 > $30,000 –> 4.82%
$30,000 > $75,000 –> 5.70%
$75,000+ –> 6.00%
Retirement income is now tax free for those age 55 or older and for disabled taxpayers, including:
Pensions, 401(k)s, annuities, individual retirement arrangements (IRAs), deferred compensation plans, and other retirement plans
Farmers age 55 or older who have farmed for at least 10 years and are retired can choose either to eliminate the tax on cash rent or crop share agreements or to exclude net capital gains from the sale of farmland. More details can be found here.
Net capital gains from employee stock ownership plans (ESOPs) can be excluded from taxation.
Tax year 2023 is the first time taxpayers in Iowa will enjoy savings from this legislation. Some Iowans may see withholding adjustments on their paychecks, while others may not notice changes until next year when they begin to work on their 2023 tax returns.
In addition to the income tax reform legislation enacted in 2022, another law affects a different tax. Beginning January 1, 2023, feminine hygiene products and both child and adult diapers are exempt from the sales and use tax in Iowa.
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