Iowa Estate Tax: Everything You Need to Know

Iowa does not levy an estate tax, but Iowans may still have to pay the federal estate tax if they have enough assets. The Hawkeye State has an inheritance tax to consider as well. This guide will walk Iowans through what they need to know to prepare their estates and make sure their families are taken care of when they pass away. It isn’t always simple to plan an estate, though, and you may want help. SmartAsset offers a free financial advisor matching tool to help you find advisors in your area.

Iowa Estate Tax

Iowa is one of 38 states that does not have an estate tax.

What Is the Estate Tax?

Sometimes referred to as the “death tax,” the estate tax is levied on the estate of someone who has recently died. It applies to the money and property within the estate before being passed on to a person’s designated heirs. Estates must reach a certain threshold before they are subject to the estate tax.

Don’t confuse estate tax with inheritance tax. Inheritance tax is a separate tax that is levied by certain states on money after it has already been passed on to a person’s heirs.

Iowa Inheritance and Gift Tax

Iowa does have an inheritance tax, which beneficiaries are responsible for paying on their inheritance. There are a number of categories of inheritor for the inheritance tax, but only two are relevant for individuals:

Tax Rate B: This is for siblings, half-siblings and children-in-law. The rate ranges from 5% to 10%, based on the size of the inheritance.
Tax Rate C: This is for uncles, aunts, nieces, nephews, foster children, cousins, brothers-in-law, sisters-in-law and all other individuals. The rate ranges from 10% to 15%, depending on the size of the inheritance.

The following relations owe no inheritance tax when they inherit money from a deceased relative: parents, grandparents, great-grandparents, children, stepchildren, grandchildren, great-grandchildren and any other lineal ascendants or descendants. If your relation to the person leaving you money is any of the above, you won’t owe inheritance tax regardless of the size of your inheritance.

Iowa is planning to completely repeal the inheritance tax by 2025.

Iowa does not have a gift tax. The federal gift tax has a $18,000 exemption for each gift recipient in 2024, up from $17,000 in 2023. If you give a single person more than $18,000 in 2024, you must file that gift with the IRS. Your 2024 lifetime gift tax exemption of $13.61 million will then decrease, as will your federal estate tax exemption.

Federal Estate Tax

Though you won’t owe a state-level estate tax in Iowa, the federal estate tax may apply. The federal estate tax exemption increased to $13.61 million for deaths in 2024, up from $12.92 million for deaths in 2023. The exemption is portable for married couples, meaning two spouses can protect up to $27.22 million when they take the right legal steps.

Estates that exceed this exemption must pay the estate tax. Rates are progressive, with a top rate of 40%. A full table of rates is provided below.

Here’s an example: Let’s say an unmarried person has an estate that is worth $19.43 million. First, subtract the $13.61 million exemption. This leaves a taxable estate of $5.82 million, placing this estate in the highest bracket. The estate owes $345,800 as a base payment on the first $1 million, plus 40% on the remaining $4.82 million. That equals $1.928 million. Add that sum to the base payment and you’ll get a total estate tax burden of $2,273,800.

Federal Estate Tax Rates

Taxable Estate*	Base Taxes Paid	Marginal Rate	Rate Threshold**
$1 – $10,000	$0	18%	$1
$10,000 – $20,000	$1,800	20%	$10,000
$20,000 – $40,000	$3,800	22%	$20,000
$40,000 – $60,000	$8,200	24%	$40,000
$60,000 – $80,000	$13,000	26%	$60,000
$80,000 – $100,000	$18,200	28%	$80,000
$100,000 – $150,000	$23,800	30%	$100,000
$150,000 – $250,000	$38,800	32%	$150,000
$250,000 – $500,000	$70,800	34%	$250,000
$500,000 – $750,000	$155,800	37%	$500,000
$750,000 – $1 million	$248,300	39%	$750,000
Over $1 million	$345,800	40%	$1 million

*The taxable estate is the total above the 2024 federal exemption of $13.61 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.

Overall Iowa Tax Picture

Iowa’s retirement tax laws are moderately friendly for retirees. The state does not tax Social Security income. Iowa does tax payments from retirement accounts, like 401(k) plans, and income from pension plans. However, anyone 55 or older is eligible for a deduction of up to $6,000 against the total of all retirement income — $12,000 for a couple filing jointly. The state’s income tax is progressive, with rates ranging from 4.4% to 6%.

The Hawkeye State’s property tax rate is 1.57%. The relatively low home values in the state, however, mean that property tax payments are below average.

Estate Planning Tips

A financial advisor can help you tasks related to estate planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
A living trust is one way to store your assets. It won’t protect you against estate taxes but it could help your estate avoid probate, which would make life easier for your family after you’ve died.