How Iowa taxes retirement income
Iowa does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Social Security benefits are fully and unconditionally exempt from Iowa income tax at any age (confirmed separately from the pension exclusion; Iowa has not taxed Social Security since 2014). Separately, for tax years beginning on or after January 1, 2023, Iowa allows an UNLIMITED (no dollar cap) exclusion of retirement income, IPERS, other governmental and private pensions, annuities, traditional/Roth IRAs, 401(k), 403(b), 457(b), SEP, SIMPLE, and Keogh plan distributions, but ONLY for taxpayers who are 55 years of age or older as of December 31 of the tax year, are disabled, or are a surviving spouse/survivor with an insurable interest in a qualifying decedent (Iowa Admin. Code r. 701-302.47). A taxpayer under 55 who is not disabled gets no exclusion at all: their pension, 401(k), and IRA distributions are fully taxable as ordinary income at Iowa's flat 3.8% rate, same as any other income. Nonqualified deferred compensation and nonqualified annuities never qualify for the exclusion regardless of age.
Retirement income tax in Iowa, at a glance
| Income type | Taxed by Iowa? |
|---|---|
| Social Security | No |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | None |
| Avg. property tax rate | 1.33% of home value |
Does Iowa tax Social Security benefits?
No. Iowa does not tax Social Security benefits.
Does Iowa tax pensions and 401(k) or IRA withdrawals?
Partly. Social Security benefits are fully and unconditionally exempt from Iowa income tax at any age (confirmed separately from the pension exclusion; Iowa has not taxed Social Security since 2014). Separately, for tax years beginning on or after January 1, 2023, Iowa allows an UNLIMITED (no dollar cap) exclusion of retirement income, IPERS, other governmental and private pensions, annuities, traditional/Roth IRAs, 401(k), 403(b), 457(b), SEP, SIMPLE, and Keogh plan distributions, but ONLY for taxpayers who are 55 years of age or older as of December 31 of the tax year, are disabled, or are a surviving spouse/survivor with an insurable interest in a qualifying decedent (Iowa Admin. Code r. 701-302.47). A taxpayer under 55 who is not disabled gets no exclusion at all: their pension, 401(k), and IRA distributions are fully taxable as ordinary income at Iowa's flat 3.8% rate, same as any other income. Nonqualified deferred compensation and nonqualified annuities never qualify for the exclusion regardless of age.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Iowa taxation of retirement income (Social Security, pensions, 401(k)/IRA): Iowa Department of Revenue / Taxation.