Does Iowa Tax Social Security and Retirement Income?

Iowa does not tax Social Security

Iowa’s return begins with federal taxable income, which can include up to 85% of a household’s Social Security benefits. The amount from federal Form 1040, line 6b, is then subtracted in full on IA 1040 Schedule 1, line 5. The instructions put it in one sentence: Iowa does not tax Social Security benefits. There is no income ceiling and no age test. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

Railroad retirement income is subtracted as well, on Schedule 1, line 7, whatever the recipient’s age. Residents above the filing thresholds still file an IA 1040 even when no tax results: a single filer 65 or older files once income, measured before the federal standard deduction, is more than $24,000, and a married couple with either spouse 65 or older once it is more than $32,000. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Pensions are fully excluded from age 55; military retirement pay at any age

Since tax year 2023 Iowa has excluded retirement income for a taxpayer who is 55 or older on December 31 of the tax year, or disabled. The exclusion has no dollar limit. The Department of Revenue lists defined benefit, pension, profit-sharing and stock bonus plans qualified under Internal Revenue Code section 401, which takes in ordinary private-employer pensions as well as IPERS, the state’s public employee system. The list is drawn by type of plan under the Internal Revenue Code, not by employer, so private and government pensions are treated alike. (Iowa Department of Revenue: Retirement Income Tax Guidance)

The test is applied person by person. On a joint return only the spouse who is 55 or older, or disabled, can exclude their own retirement income; income belonging to a younger spouse stays taxable at 3.8% until that spouse reaches 55. If both qualify, all eligible retirement income of both is excluded. (Iowa Department of Revenue: Retirement Income Tax Guidance)

A surviving spouse can exclude benefits received because of the death of someone who would have qualified by age or disability in that year, and so can a son, daughter, mother or father of the pensioner with an insurable interest. A surviving spouse receiving a deceased spouse’s pension from a protection occupation, or from service as a sheriff, deputy sheriff, firefighter or police officer, qualifies whatever the deceased spouse’s age was. (Iowa Department of Revenue: Retirement Income Tax Guidance)

Military retirement benefits have their own line, Schedule 1, line 4, with no age condition. Two kinds of payment fall outside the retirement exclusion at any age and are taxed at 3.8%: non-qualified deferred compensation, and non-qualified annuities, which the instructions note usually carry code “D” in box 7 of Form 1099-R. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

IRA and 401(k) withdrawals and Roth conversions are excluded from age 55

The same exclusion covers account-based plans. The Department’s guidance names traditional IRAs, SEP plans, SIMPLE IRAs, Keogh plans, 401(k) plans, eligible 457(b) plans and employee stock ownership plans, and says the list is not exhaustive. A person 55 or older subtracts the whole federally taxed distribution on Schedule 1, line 7; a person under 55 who is not disabled subtracts nothing. (Iowa Department of Revenue: Retirement Income Tax Guidance)

Roth conversions qualify. Both the guidance and the IA 1040 instructions list “Roth conversion income” among the eligible items, so a $100,000 conversion by a 60-year-old adds $100,000 to federal taxable income and $100,000 to the line 7 subtraction, with no Iowa tax. The same conversion at 54 would cost $3,800. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and capital gains are taxed at 3.8%

Investment income is what Iowa still taxes in retirement. Interest, dividends and capital gains are part of federal taxable income, the starting point of the return, and no general subtraction applies to them. The single 3.8% rate applies to all taxable income, so a long-term gain is taxed at the same rate as bank interest: a $200,000 gain adds $7,600 of Iowa tax. (Iowa Code 422.5, Tax imposed, exclusions, alternate tax rate)

Interest on federal securities, such as Treasury notes and U.S. savings bonds, is subtracted on Schedule 1, line 1. Interest on state and municipal securities that is exempt federally is added back on the same line. Iowa’s own bonds are not generally exempt: only issues named in statute, such as school infrastructure program bonds and community college bond program bonds, escape the add-back. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

The Department of Revenue has confirmed that every level of taxable individual income is taxed at a flat 3.8% in 2026, the rate set by Senate File 2442, enacted in May 2024. (Iowa Department of Revenue, IDR Announces 2026 Individual Income Tax and Interest Rates (October 21, 2025))

Iowa has no standard deduction of its own. For tax years beginning on or after January 1, 2023, the starting point is federal taxable income (IA 1040, line 2), already net of the federal standard or itemized deduction, and under rolling conformity federal changes flow in automatically unless Iowa law says otherwise. Schedule 1 additions and subtractions then produce Iowa taxable income on line 4. The 2026 IA 1040 had not been published when this page was reviewed, so line numbers follow the 2025 form. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

The federal standard deduction shown above is therefore the one that counts: $16,100 for a single filer and $32,200 for a married couple in 2026. A person 65 or older adds $2,050 if unmarried or $1,650 if married, giving $18,150 and, for a couple both 65 or older, $35,500. (IRS Revenue Procedure 2025-32, inflation adjustments for tax year 2026 (standard deduction and additional amounts))

The federal deduction for seniors, in effect for 2025 through 2028, is a further $6,000 for each person 65 or older and phases out once modified adjusted gross income passes $75,000, or $150,000 on a joint return. Our third example household, with federal AGI of $279,500, is too far above the threshold to receive any of it. (IRS: Check your eligibility for the new enhanced deduction for seniors)

Iowa follows that deduction. The Department’s withholding guidance says Iowa conforms with the federal provision allowing taxpayers 65 or older an exemption of up to $6,000. Because it is already inside federal taxable income, it reduces Iowa taxable income without a separate Iowa entry. (Iowa Department of Revenue: Impact of One, Big, Beautiful Bill Act on Employee Withholding)

The table cannot show three further rules, which the calculation on this page applies. First, no tax is imposed when net income is $9,000 or less ($13,500 for joint filers), or $24,000 or less ($32,000 joint) when the taxpayer or either spouse is 65 or older. Second, joint filers above those amounts pay the lesser of the regular tax and an alternate tax of 4.3% of the excess. For both tests the federal deductions are added back to income. (Iowa Code 422.5, Tax imposed, exclusions, alternate tax rate)

Third, exemption credits come off the tax: $40 for a single filer, $80 for a married couple filing jointly, and a further $20 for each filer or spouse who is 65 or older or blind. A couple who are both 65 or older subtract $120. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

Two local surtaxes sit on top of the state tax and are left out of the examples because they depend on the address. School districts may levy a voter-approved surtax of up to 20% of the state income tax liability, and counties an emergency medical services surtax of up to 1%, which the Department reports only Appanoose County currently imposes. (Iowa Department of Revenue: Iowa Tax/Fee Descriptions and Rates)

The main break is the retirement income exclusion, which starts at 55, well before the usual retirement age. It has no dollar cap and no income limit. In our three example households it removes $40,000, $70,000 and $150,000 of pension and IRA income, on top of the Social Security subtraction. (Iowa Department of Revenue: Retirement Income Tax Guidance)

At 65 the thresholds below which no Iowa tax is imposed rise from $9,000 to $24,000 for single filers and from $13,500 to $32,000 for joint filers, and it is enough for one spouse to be 65 at the end of the tax year. Income for this test is measured before the federal standard deduction. (Iowa Code 422.5, Tax imposed, exclusions, alternate tax rate)

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Iowa's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

With most retirement income exempt, property tax is the larger Iowa bill for many retired homeowners. As a comparative figure, the Tax Foundation’s 2026 report, using 2024 Census data, puts property taxes at 1.33% of owner-occupied home value, ninth highest among the states. That is about $5,320 a year on a $400,000 home. The report’s county figures show 1.57% in Polk County and 1.40% in Johnson County. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

Senate File 2472, signed on May 18, 2026, replaced the homestead credit with a homestead exemption, retroactive to assessment year 2026 and first seen in the taxes paid in September 2027 and March 2028. The exemption is 10% of the home’s taxable value, with a floor of $5,500 and a ceiling of $20,000 that is indexed for inflation from assessment year 2027. The old credit was the tax on the first $4,850 of value. Owners who already had the credit receive the exemption without refiling. (Iowa Department of Revenue: Homestead Tax Credit and Exemption)

Owners who are 65 or older by January 1 of the assessment year get a further exemption of $6,500 of taxable value, applied after the 10% exemption. In the Department’s example, a $300,000 home with a taxable value of $133,603 and a levy of $32 per $1,000, the 65-or-older owner’s bill falls from about $3,912 to $3,639. (Iowa Department of Revenue: Homestead Tax Credit and Exemption)

The same act limits local levy growth. For fiscal years beginning on or after July 1, 2027, a county’s basic levies and a city’s general fund levy are capped at the rate that raises 102% of the current year’s property tax dollars from existing property. It also raises the property tax counted for the elderly and disabled credit from $1,000 to $1,500, for taxes payable in those fiscal years. (2026 Iowa Acts, Senate File 2472 (enrolled), property taxation)

The property tax credit for elderly and disabled residents is tested on a broad measure of income. For the 2026 claim, based on 2025 income, a homeowner 65 or older needed total household income under $26,895, and the credit ranged from 100% of up to $1,000 of property tax at incomes below $13,855 down to 25% just under the limit. Household income counts all Social Security and all retirement income, including amounts Iowa does not tax. Limits for claims filed in 2027 had not been published when this page was reviewed. (Iowa Department of Revenue, 2026 Iowa Property Tax Credit Claim and instructions (Form 54-001))

Claimants 70 or older qualify at higher incomes: below 250% of the federal poverty level, which for the 2026 claim was $39,125 for one person and $52,875 for two. They receive the greater of the regular credit and the difference between the current year’s tax and the tax due in the first year they claimed. A claim must be filed with the county treasurer every year. (Iowa Department of Revenue: Property Tax Credit Expanded and Credit Calculation Amended)

Iowa’s state sales and use tax rate is 6%. Counties, cities and unincorporated areas that have authorized it add a local option sales tax of 1%, so the rate in many places is 7%. There is no local option use tax. Vehicle purchases are outside the sales tax and instead bear a fee for new registration based on 5% of the sale or lease price. (Iowa Department of Revenue: Iowa Tax/Fee Descriptions and Rates)

As a comparative figure, the Tax Foundation puts Iowa’s average combined state and local rate at 6.94% as of January 1, 2026, ranking 29th among the states. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

Most food and food ingredients bought for home consumption are exempt, including meat, dairy, bread, produce and most snack foods. Candy, soft drinks, alcoholic beverages, prepared food, dietary supplements and vitamins are taxable. Prescription drugs are exempt, while health products bought without a prescription are generally taxable. (Iowa Department of Revenue: Iowa Sales Tax on Food)

Iowa no longer taxes transfers at death. The Department of Revenue states that the inheritance tax is not applicable for deaths occurring on or after January 1, 2025, and that the Iowa estate tax has not applied to deaths since January 1, 2005. (Iowa Department of Revenue: Introduction to Iowa Inheritance Tax)

The inheritance tax still matters for older estates: where the death occurred before January 1, 2025, the rules for that year continue to apply, and the Department still publishes the IA 706 instructions. For anyone dying now, heirs of every relationship inherit free of Iowa tax; only the federal estate tax can apply. (Iowa Department of Revenue: Introduction to Iowa Inheritance Tax)

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

Senate File 2472, signed May 18, 2026, is the major change for homeowners: the 10% homestead exemption from assessment year 2026, levy growth limits from fiscal year 2027-2028 and a larger elderly and disabled credit for taxes payable from that same fiscal year. (2026 Iowa Acts, Senate File 2472 (enrolled), property taxation)

The federal senior deduction that Iowa follows is temporary. It applies for 2025 through 2028, so unless Congress extends it, Iowa taxable income for filers 65 or older rises by up to $6,000 per person from 2029. (IRS: Check your eligibility for the new enhanced deduction for seniors)

The threshold for making estimated payments rises from $200 to $1,000 of expected Iowa tax for 2026, so a retiree whose only Iowa-taxable income is a modest amount of interest and dividends is less likely to owe quarterly payments. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

Iowa defines a resident as any individual domiciled in the state and any other individual who maintains a permanent place of abode within it. The second limb matters to people who leave: keeping a home in Iowa can leave a person an Iowa resident for income tax even after a domicile has been set up elsewhere. (Iowa Code 422.4, Definitions (resident))

Where intent is unclear the Department weighs a list of factors, none decisive alone, including voter registration, driver’s license and vehicle registration, whether a homestead credit is claimed, the size of the Iowa home against homes elsewhere, days spent in each state and the state named in a will. Part-year residents and non-residents file the IA 1040 with Schedule IA 126, and are exempt when Iowa-source net income is under $1,000. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

A part-year resident reports pension, annuity and IRA income received while an Iowa resident, along with interest, dividends and gains from that period. From age 55 the retirement income is excluded in any case, so the practical effect of moving in or out is on investment income. (Iowa Department of Revenue, 2025 IA 1040 Expanded Instructions)

Federal law (4 U.S.C. 114) bars any state from taxing the retirement income of a person who is not a resident or domiciliary of that state. A pension or IRA built during a career in a state that taxes retirement income is taxed only by the state of residence when it is paid, which for an Iowa resident of 55 or older means not at all. In the other direction, Iowa cannot tax a former resident’s IPERS or 401(k) payments. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)