DES MOINES, IOWA (October 26, 2023) — The Iowa Department of Revenue has finalized individual income tax brackets for the 2024 tax year (applicable for taxes due in 2025) and the 2024 interest rate, which the agency charges for overdue payments.
Individual Income Tax Bracket
Iowa law provides for the indexation of individual income tax brackets each year. This is done by applying inflation factors to, or “indexing,” the previous year’s levels. Iowa Code sections 422.4 and 422.5 define procedures for the calculation of inflation factors and the indexation of income tax brackets. Indexation is meant to protect taxpayers from paying higher income taxes solely as a result of inflation.
Tax year 2024 Iowa income tax brackets are shown in the tables below. Iowa Code provides for two separate sets of individual income tax brackets; one set of brackets for married taxpayers filing jointly and another set for all other taxpayers. In each of these sets, there will be three brackets in tax year 2024.
Under current law, Iowa will phase down over the next two years to a single tax rate for all taxpayers; there will be two brackets in 2025 with a top rate of 4.82 percent and a single flat rate of 3.9 percent for all levels of income effective with tax year 2026.
For married taxpayers filing jointly:
Taxable Income | Tax
Over; But Not Over | (Tax Rate x Of Excess Over)
$0; $12,420 | $0.00 + (4.40% x $0)
$12,420; $62,100 | $546.48 + (4.82% x $12,420)
$62,100; --- | $2,941.06 + (5.70% x $62,100)
For all tax-payers other than married taxpayers filing jointly:
Taxable Income | Tax
Over; But Not Over | (Tax Rate x Of Excess Over)
$0; $6,210 | $0.00 + (4.40% x $0)
$6,210; $31,050 | $273.24 + (4.82% x $6,210)
$31,050; --- | $1,470.53 + (5.70% x $31,050)
Iowa Department of Revenue Interest Rate
Starting January 1, 2024, the interest rate for taxpayers with overdue payments will be:
* 10.0% annually
* 0.8% monthly
* 0.027322% daily
Iowa Code Section 421.7 specifies the procedures for calculating the Department’s annual and monthly interest rates. The annual rate is based on the average monthly prime rate during the preceding twelve-month period (October through September). Iowa law requires that this average be rounded to the nearest whole percent and two percentage points to be added to it. The prime rate averaged 7.78 percent over the past twelve months. Rounded to the nearest whole percent, this average is 8.0 percent. Adding two percentage points results in the annual Department rate of 10.0 percent. The monthly rate is the annual rate divided by twelve, rounded to the nearest one-tenth of a percentage point. The daily rate for 2024, which is a leap year, is the annual rate divided by 366. The average monthly bank prime rate is published by the United States Federal Reserve.
