On March 1, Governor Kim Reynolds signed Iowa’s most significant tax reform bill in state history into law. The bill establishes a 3.9% flat personal income tax rate and eliminates state tax on retirement income. It also eliminates the exemption of net capital gains on the sale of employee-awarded capital stock. When fully phased in by 2026, Iowa's personal income tax rate will be the fourth lowest among states that charge income tax, making Iowa one of the most tax-friendly states in America.
Corporate income tax
The changes to Iowa’s tax brackets also drastically altered how Iowa companies are taxed on their income. Corporate taxes will decrease gradually to a 5.5% flat corporate income tax every year Iowa has more than $700 million in net corporate income tax receipts.
Corporate tax levels directly affect economic activity in states, and those with more competitive structures and rates are in much better positions to grow existing businesses and attract new ones. These pro-business strategies are helping Iowa maximize its competitive advantage by helping businesses reduce their tax rate when they increase their revenue in Iowa.
The transformation of Iowa’s tax code is designed to influence investment and location decision-making. “We’re sending a very clear message to the rest of the country that Iowa is open for business,” Governor Reynolds proclaimed.