Iowa Tax is determined by nine income tax brackets and which one you fall into. These tax rate brackets range from 0.36% to 8.98%. In Iowa, you can also deduct your federal taxes from your state taxes.
The Sales Tax rate is at 5% with an additional 1% going to local school districts. There is also a local option sales tax that goes up to 1%, and it’s imposed on most cities and the unincorporated portions of most Iowa counties. This generally brings the total up to 7%. For unprepared food, there is no sales tax.
There is a sales tax holiday on the first Friday of August to help people purchasing back-to-school supplies.
The local option sales tax revenue can be used for any lawful purpose, however it cannot go to fund a school district. The tax is largely imposed on the same things as the Iowa State Sales Tax. There are a few things it can’t be applied to, including: room rentals (hotel, motel), equipment sold by the State Department of Transportation, the sale of direct-to-home satellite pay television service, and more.
Property tax in Iowa is determined by the real property’s taxable value. There are also over 2,000 taxing authorities in Iowa, which means most property is taxed by at least more than one authority. In each locality, the tax rate differs and ends up being a composite of county, city and rural township, special levies and school district.
Earned Income Credit
Since 2007 the Iowa Earned Income Tax Credit did undergo some changes, but it’s pretty much stayed the same from 2010 onward. To calculate your Earned Income Tax Credit, you take your federal Earned Income Tax Credit and multiply it by .07 (7%).