Today Gov. Kim Reynolds signed the state’s most historic tax reform bill into law at LBS, an Employee Stock Ownership Plan business, where she first touted the plan just a month ago.
The bipartisan bill, which passed in both the House and Senate last week, lowers the individual income tax rate for all Iowans to a flat and fair 3.9% rate by 2026, eliminates income tax on all retirement income starting in 2023, and overhauls Iowa’s corporate tax system.
“When I took office, Iowa had the sixth-highest individual income tax rate in the nation at 8.98%. I believed Iowans deserved better,” said Gov. Reynolds. “Since then, I’ve worked with the Legislature across multiple sessions to make transformative changes to our tax code, let Iowans keep more of their hard-earned money, and make our state more competitive. With this bill, Iowa is now the fourth lowest for individual income tax rate in the nation. There’s never been a better time in Iowa for bold, sustainable tax reform. This bill rewards work, takes care of our farmers, and supports our retirees, all while protecting key state priorities. Iowans will reinvest these dollars in our economy, communities will prosper, and families will rest a little easier. Once again, we’re putting our faith in Iowans, and they won’t let us down.”
Beginning in Tax Year 2023, the tax liability for nearly 295,000 Iowa taxpayers will be eliminated under the retirement provision of this new tax law and 98% of Iowa taxpayers with $10,000 or more of taxable income will see a decrease in tax liability by Tax Year 2026.
For farmers, age 55 or older who have farmed at least 10 years and are retired, this bill allows an option to eliminate the tax on cash rent or crop share agreements for all years the income is earned.