How Iowa withholds on a bonus
Iowa lets employers withhold a flat 3.8% on supplemental wages paid separately, its single income tax rate since 2025; before the flat tax the supplemental rate was 6%. On a $10,000 bonus the percentage method withholds $2,200 federal, $620 Social Security, $145 Medicare and $380 Iowa, leaving $6,655. Iowa has no city or county income taxes, though about a third of school districts levy an income surtax of up to 20% of state tax, settled on the return rather than withheld.
Because the rate is flat, the aggregate method leaves Iowa's line almost unchanged and raises the federal line to about $2,700 for a $60,000 earner paid every two weeks. The federal standard deduction Iowa adopts has usually been consumed by salary, so a bonus is taxed at the full 3.8% on the return (plus any school surtax) and the state withholding settles close to even.
What the withholding means for your Iowa return
Any refund on an Iowa bonus is federal. A $60,000 single filer's marginal federal rate is 12% up to $50,400 of taxable income and 22% above, so a $10,000 bonus is really taxed at about $1,450 federal against $2,200 withheld, and roughly $750 returns. Illinois residents who earn a bonus in Iowa are withheld for Illinois under the two states' reciprocal agreement. The Iowa paycheck calculator shows the marginal rates for any salary. Allowances on Form IA W-4 do not reduce the flat 3.8% withheld from a separately paid bonus; they apply only when the bonus is combined with regular wages.