Iowa's Income Tax Relief for 2024

Iowa Gov. Kim Reynolds.Photo byCharlie Neibergall / AP

In 2024, Iowans are poised to retain more of their earnings as the state's top marginal income tax rate is set to decrease from 6% to 5.7% starting January 1. Governor Kim Reynolds, acknowledging the $1.83 billion surplus in fiscal year 2023, perceives this surplus not as government frugality but as excessive collection from hardworking citizens.

Governor Reynolds emphasized the intent to channel the benefits directly back to the people of Iowa, indicating a forthcoming reduction in taxes during the legislative session in January. The income tax cuts initiated in 2022 serve as a precursor to achieving a targeted 3.9% flat income tax rate by 2026.

Additionally, corporate tax rates are due for a substantial reduction, declining from 8.4% to 7.1% for businesses generating over $100,000 in income, while those with revenues under $100,000 will face a 5.5% tax rate. Lawmakers also enacted reductions in inheritance tax from 4% to 2% and franchise tax from 4.7% to 4.4%, effective in 2024.

These measures constitute the second phase of tax reductions championed by Reynolds and the legislature. The prior year's tax cuts, which amounted to $561 million returned to taxpayers, did not negatively impact the state's financial standing, as highlighted by the Revenue Estimating Conference.

Kraig Paulsen, Committee Chair, affirmed that no revisions are necessary for the fiscal year 2024 budget. Projections indicate general fund revenues reaching $9.6 billion for fiscal year 2025, as outlined by the committee.

Iowa's legislators are scheduled to reconvene in Des Moines for the 2024 legislative session commencing on January 8, with Governor Reynolds slated to address the Legislature on January 9.