Kiplinger’s: Iowa Least Tax Benefit for Middle Class Families | Iowa


(The Center Square) – Iowa was the third least tax-efficient state for middle-class families, Kiplinger’s personal finances recently reported.

“What do you think is higher in Iowa: corn or taxes?” It could be taxes, thanks to huge revenues and state property taxes, ”the report notes.

One of the reasons income taxes are high is local surtaxes on school district income. In 2023, personal income tax rates will vary from 4.4% for single tax filers earning up to $ 6,000 in income to 6.5% for single tax filers earning over $ 75,000. (The thresholds are doubled for joint filers.) Currently, state income taxes range from 0.33% for those earning less than $ 1,676 in taxable income to 8.53% for those who earn more than $ 75,420. In 2022, the lower rate applies to residents of Iowa with taxable income of $ 1,743 and the higher rate applies to taxable income over $ 78,435.

Iowa’s median property tax rate is the 11th highest in the United States (median of $ 1,529 per $ 100,000 of assessed property value), which works out to about $ 4,587 per year for a home of 300 $ 000.

Sales taxes in Iowa are 6%, with some locations assessing an additional 1%.

“This puts Iowa’s combined average state and local sales tax rate (6.94%, according to the Tax Foundation) in the middle of the pack compared to rates in other states,” the report said.

Groceries and prescription drugs are exempt. Clothing is taxable. Motor vehicles are not subject to ordinary sales tax, except for a one-time registration fee of 5%. Drivers pay 30 cents per gallon for gasoline and 32.5 cents per gallon for diesel. There is an annual vehicle registration fee, which influences the weight and age of the car.

Taxes on cigarettes and little cigars are $ 1.36 per pack. Beer is subject to a tax of 19 cents per gallon while wine is taxed at $ 1.75 per gallon. Liquor taxes are estimated at $ 13.03 per gallon according to the Distilled Spirits Council of the United States and published by the Tax Foundation.

Lawmakers decided this year to phase out inheritance tax. It will end on January 1, 2025.

Kiplinger said Illinois was the least tax-efficient state for middle-class families. He said the Land of Lincoln rates middle-income residents at or above average income, sales taxes, and property taxes. Its flat tax rate of 4.95% is the ninth highest in the country. Its average state and local sales tax in Illinois is 8.83%, the seventh highest in the United States

“The tax picture is getting worse really quickly for residents of Illinois when you look at the property taxes they have to pay. Property taxes in Illinois are the second highest in the country, ”the article said. “If our hypothetical family bought a $ 300,000 house in the state, their average annual property tax bill would be $ 6,495.”

Wisconsin, Michigan, Nebraska, Kansas, New York, Connecticut, Maryland, and New Jersey were also in the top 10 least tax states for middle-class families.

On the other end of the spectrum is one of Iowa’s neighbors: North Dakota.

Compared to Iowa, North Dakota has gasoline taxes per gallon (23 cents), median property taxes ($ 986 in taxes per $ 100,000), income tax bracket (1, 1% to 2.9%) and a state sales tax (5%). (However, it has a slightly higher combined state and local average rate, 6.96%). There is no inheritance tax, annual vehicle tax or fees, while there is a special 5% excise tax.

Other “tax-efficient” states for middle-class families are Washington, Nevada, California, Arizona, Alaska, Tennessee, Wyoming, Florida, and Delaware.


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