Iowa residents will see their state tax burden shrink a little bit in the new year.

That’s because on Sunday, the state’s income tax reform will go into effect, gradually lowering rates until a 3.9 percent flat tax is achieved in 202

The highest personal income tax rate was 8.7 percent, but a change approved by the legislature and Gov. Kim Reynolds early this year will ratchet the rate down.

In the new year beginning Sunday, Iowa’s personal income tax rate will range between 4.4 percent and 6 percent, depending on a person’s earnings.

In 2024 and 2025 the highest tax rate will be trimmed until 2026 when the state will have a flat income tax rate of 3.9 percent.

The same law that is cutting the income tax rate also has benefits for retirees.

Effective Sunday, all pension income will be exempt from state income tax.

Also effective Sunday, all withdrawals from qualifying retirement savings plans will be exempt from state income tax.


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