How Iowa taxes a paycheck
Iowa's income tax has been transformed in four years. In 2022 it had nine brackets topping out at 8.53%; a 2022 law scheduled a flat 3.9% for 2026, and SF 2442 in 2024 accelerated that to a flat 3.8% from 1 January 2025. The rate applies to federal taxable income, so the $16,100 federal standard deduction ($32,200 married) is removed first, and a $40 credit per person and per dependent stands in for a personal exemption. Iowa also stopped taxing retirement income in 2023.
About a third of Iowa school districts levy an income surtax, a percentage of the state tax rather than of income, of up to 20%. A resident of a district with a 10% surtax pays 10% more state tax; it is collected on the return and is not in this estimate. There are no city or county income taxes.
How much taxes are taken out of paychecks in Iowa?
On a $60,000 salary in 2026, a single filer in Iowa pays about $5,020 in federal income tax, $4,590 in Social Security and Medicare, and about $1,630 in Iowa income tax, leaving roughly $48,760 a year or $1,875 every two weeks. The state share is 2.7% of gross pay, a fraction of what the same salary paid before the reforms.
At $150,000 the Iowa tax is about $5,050, an effective rate of 3.4%; a married couple on $100,000 pays about $2,500.
Iowa compared with its neighbours
Iowa touches six states. South Dakota taxes no wages. On a $60,000 single salary the state tax is about $1,630 in Iowa, $2,560 in Minnesota, $1,860 in Wisconsin, $2,830 in Illinois, $1,650 in Missouri and $1,850 in Nebraska. Iowa is now the cheapest of the taxing neighbours, a reversal from 2021 when it was the most expensive.
Nebraska is following a similar path, with its top rate at 4.55% for 2026 and scheduled to reach 3.99% in 2027, so the gap with Iowa will narrow. Illinois, at a flat 4.95% with no standard deduction, is now the outlier in the region.
Withholding forms and filing status in Iowa
Iowa employers withhold from Form IA W-4, on which employees claim allowances; the tables apply the flat 3.8% after the federal standard deduction Iowa adopts. Iowa couples may file jointly or separately on the same return, and since the deduction doubles for joint filers and the rate is flat, the two produce the same result for most; the separate option survives from the graduated-rate era.
Iowa has a reciprocal agreement with Illinois only: an Illinois resident working in Iowa pays Illinois tax and asks the Iowa employer not to withhold, and the reverse. Iowa residents working in Nebraska, Missouri or Minnesota pay those states' tax and credit it in Iowa. The school district surtax is determined by the district of residence on 31 December and settled on the return.