Governor Reynolds signed Iowa’s tax reform bill into law in May with the intent to modernize and simply Iowa income tax law. Changes in the law are set to phase-in over time and some hinge on the State meeting revenue projections before going into effect.
Key provisions effective in 2018 include tax-free withdraws up to $10,000 per beneficiary to pay for k-12 tuition expenses at accredited schools and a deduction of up to $100,000 for distributions from an individual retirement account that are sent to qualified charities if the taxpayer is over 70 1⁄2 years of age. These laws coupled with others that will become effective in 2019 make Iowa tax law more consistent with Federal tax law. Additionally, investors will gain flexibility in managing these types of accounts without the additional tax burden.
A positive law change for many of our clients is the reduction of the top individual income tax rate from 8.98% to 8.53%, effective in 2019. Assuming the State reaches its revenue targets, consolidation from nine to four tax brackets will occur in 2023. At that point, the top rate would decline again from 8.53% to 6.5%.
Various other tax law provisions not included in this article are set to change as well. Contact firstname.lastname@example.org to learn more about how the tax law affects you.