Iowa does not tax Social Security benefits
Iowa is one of the states that does not impose income tax on Social Security payments. If Social Security is your only income source, you will not owe state income tax to Iowa on those benefits. This applies whether you receive retirement, survivor, or disability benefits.
However, the federal government may tax your Social Security benefits depending on your total income. The amount of federal tax owed has nothing to do with Iowa's rules — it depends on your combined income from all sources and your filing status. Many people who receive Social Security pay no federal tax on it, but some do.
Key Takeaways
- Iowa does not tax Social Security retirement, survivor, or disability benefits at the state level.
- The federal government may tax your Social Security benefits if your total income exceeds certain thresholds, which vary by filing status.
- Your total income includes wages, pensions, interest, dividends, and half of your Social Security benefits — not just the benefits themselves.
- You can request that the Social Security Administration withhold federal taxes from your monthly payment to avoid owing a large amount at tax time.
How federal taxation of Social Security works
The federal government uses a formula based on your combined income to determine whether your Social Security is taxable. Combined income means your adjusted gross income plus nontaxable interest plus half of your Social Security benefits.
If you file as single and your combined income is between $25,000 and $34,000, you may owe federal tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85 percent of your benefits. For married couples filing jointly, these thresholds are $32,000 and $44,000.
If your combined income falls below these thresholds, your Social Security benefits are not subject to federal income tax. Many people in Iowa fall into this category and owe nothing to the federal government on their benefits.
What counts toward your combined income
Combined income includes more than just your Social Security check. It includes wages from work, income from a pension or retirement account, interest earned on savings accounts or bonds, dividends from stocks or mutual funds, and rental income. It also includes half of your Social Security benefits themselves, which is why the formula can push you over a threshold even if you do not think your income is that high.
Some types of income do not count. Municipal bond interest and certain other nontaxable income are excluded from combined income calculations. If you are unsure whether a particular income source counts, the Social Security Administration's website has a worksheet you can use, or you can ask a tax preparer.
Requesting federal tax withholding from your benefits
If you expect to owe federal income tax on your Social Security benefits, you can ask the Social Security Administration to withhold taxes from your monthly payment. This prevents you from facing a large bill when you file your tax return.
To request withholding, complete Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office or mail it to Social Security. You can choose to have 7, 10, 12, or 22 percent of your benefit withheld each month. You can change your withholding amount or stop it at any time by submitting a new form.
Many people find it simpler to have taxes withheld than to pay a lump sum at tax time. If you work with a tax preparer, they can help you decide whether withholding makes sense for your situation.
Other Iowa tax considerations for retirees
While Iowa does not tax Social Security, the state does tax other retirement income. Pensions, 401(k) withdrawals, IRA distributions, and annuity payments are all subject to Iowa income tax. If you receive income from these sources in addition to Social Security, you will owe Iowa state tax on the non-Social Security portion.
Iowa also taxes interest and dividend income. If you have savings accounts, bonds, stocks, or mutual funds, the earnings from those are taxable at the state level. However, Iowa offers a tax credit for certain types of retirement income, which may reduce what you owe. A tax preparer familiar with Iowa rules can help you understand what credits you may be may have access to to.
Filing your Iowa tax return
Even though Iowa does not tax Social Security, you may still need to file an Iowa tax return if you have other income. Iowa requires you to file if your total income exceeds the filing threshold for your age and filing status. The threshold is higher for people age 65 and older.
When you file, you will report your Social Security benefits on your return, but Iowa will not tax them. You will pay tax only on your other income sources. If you have federal taxes withheld from your Social Security, you can claim that withholding on your Iowa return as well, which may result in a refund.
Frequently Asked Questions
Will I owe Iowa state tax if Social Security is my only income?
No. Iowa does not tax Social Security benefits, so if that is your only income source, you will not owe Iowa state income tax. You may still need to file a federal return depending on your age and total income, but Iowa will have no claim on your benefits.
How do I know if the federal government will tax my Social Security?
Calculate your combined income: your adjusted gross income plus nontaxable interest plus half your Social Security benefits. If you file single and that total is under $25,000, your benefits are not federally taxable. Between $25,000 and $34,000, up to 50 percent may be taxed. Over $34,000, up to 85 percent may be taxed. Married filing jointly thresholds are $32,000 and $44,000.
Can I stop federal tax withholding from my Social Security once I start it?
Yes. You can change or cancel withholding at any time by submitting a new Form W-4V to Social Security. You can also adjust the percentage withheld — your choices are 7, 10, 12, or 22 percent of your monthly benefit.
Does Iowa tax my pension or 401(k) withdrawals?
Yes. Unlike Social Security, pensions, 401(k) distributions, and IRA withdrawals are subject to Iowa income tax. However, Iowa offers a tax credit for certain retirement income that may reduce your tax liability. A tax preparer can help you understand what you owe.
What if I worked in another state before moving to Iowa?
Iowa taxes income earned while you lived there, but you may also owe tax to the state where you worked. You will file a return in Iowa as a resident and may file a part-year or nonresident return in your former state. Social Security benefits are not taxed by either state, but other retirement income may be.