Here’s how much you could save when Iowa’s income tax rate drops- Cusipnumber

DES MOINES, Iowa (Gray Media Iowa Capitol Bureau) – At the stroke of midnight Iowans will start paying less in income tax. The state will adopt a flat income tax structure with a tax cut in the new year.

Currently, Iowans pay a tax rate that ranges from 4.4-5.7% depending on how much they make. On Jan. 1, all Iowans who pay income tax will play a flat, 3.8% rate.

Chris Hagenow with Iowans for Tax Relief is celebrating. “It’s huge savings for Iowans and they should all be very excited,” he said.

So how much can Iowans expect to save? While the income tax rate will be the same for everyone, the savings won’t be.

According to the Census Bureau, the average Iowan makes a little less than $40,000 per year. When the cuts kick in, they’ll be saving $750 a year, which works out to $63 a month.

A married couple making the median household income of $73,000 will see just under $1400 a year in savings, or $115 a month.

For a married couple making a combined $250,000 in household income, they’ll save nearly $400 a month.

Nearly a third of legislative Democrats joined Republicans in supporting the cuts. Democratic Leaders however say the cuts won’t help the roughly half a million Iowans who don’t make enough to pay income taxes.

The cuts will also impact the state’s budget down the road. Estimates from the Iowa Revenue Estimating Conference shows the state will bring in less revenue in the next budget year than what the state is currently spending due to tax cuts already in effect.

Lawmakers could decide to cut spending or dip into reserve funds to cover the $184 million shortfall.

“This was all by design. I’m not concerned about it at all. The state revenue is running ahead of where we thought it would be when these tax bills were passed which only, you know, shows that the system works,” Hagenow said.

When Governor Kim Reynolds signed these tax cuts, she said the state is positioned to cut income taxes even more. Republican legislators, though, have indicated they plan to push for property tax cuts in the next session.

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Conner Hendricks covers state government and politics for Gray Media-owned stations in Iowa. Email him at [email protected]; and follow him on Facebook at Conner Hendricks TV or on X/Twitter @ConnerReports.