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Employer Guide to Iowa Withholding Taxes, Deductions, and Payroll Costs
US payroll
Author
Shannon Ongaro
Last Update
August 22, 2025
Table of Contents
Unemployment insurance tax in Iowa
Withholding personal income tax from your Iowa employee
Paying your Iowa workers' compensation
Simplify US payroll tax compliance with Deel
Key takeaways
- Unemployment insurance is a key consideration for employers in Iowa, reducing financial pressure on individuals who become involuntarily unemployed.
- Personal income tax is a state tax in Iowa imposed on state residents but withheld and managed by employers.
- With Deel Payroll, you can streamline US payroll and compliance through managed or self-serve solutions.
Employers in Iowa are responsible for managing several types of payroll taxes, including:
- Federal income tax
- FICA taxes (Medicare and Social Security)
- State payroll taxes
Iowa has a franchise tax for certain financial institutions and an excise tax for businesses selling tobacco, fuel, or rental cars.
Iowa operates with a graduated income tax rate, ranging from 4.4% to 5.7%. Iowa also has a graduated corporate income tax, with rates ranging from 5.5% to 7.1%. Nonprofits are generally subject to payroll taxes but can request reimbursable status for the Iowa UI Trust Fund.
The administration of payroll taxes in Iowa is handled by two main bodies: the Iowa Department of Revenue (IDR) for personal income taxes, and Iowa Workforce Development (IWD) for unemployment insurance (UI) taxes. Employers must report new hires within 15 days and register with the IWD within 30 days of hiring.
Employers may submit payroll taxes online through GovConnect Iowa for most taxes and myIowa UI for unemployment insurance taxes. Alternatively, estimated tax payments can be sent to the Iowa Department of Revenue by mail with Form IA 1040ES.
Unemployment insurance tax in Iowa
Iowa employers are responsible for paying unemployment insurance (UI) on behalf of their employees. UI is also known as the state unemployment insurance (SUI) tax. UI is a national program that provides temporary financial aid for workers who are unemployed through no fault of their own, which is managed by IWD in Iowa.
Employers pay UI contributions based on eight different tax rate tables, each with 21 levels. The tax rates range from 0% to 9% in Table 1 (the highest) and from 0% to 7% in Table 8 (the lowest).
These tables help keep the UI Trust Fund financially stable. When the fund's balance is low, the law requires switching to a table that collects more money. When the balance is high, it moves to a table that collects less.
All employers follow the same tax rate table each year. For 2025, private employers will use Contribution Rate Table 8:
| Benefit Ration Rank | Approximate Cumulative Taxable | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|---|
| 1 | 4.80% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% |
| 2 | 9.50% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% |
| 3 | 14.30% | 0.100% | 0.100% | 0.000% | 0.000% | 0.000% | 0.000% | 0.000% | 0.100% |
| 4 | 19.00% | 0.400% | 0.300% | 0.300% | 0.200% | 0.100% | 0.000% | 0.000% | 0.100% |
| 5 | 23.80% | 0.900% | 0.800% | 0.600% | 0.500% | 0.300% | 0.200% | 0.100% | 0.100% |
| 6 | 28.60% | 1.500% | 1.300% | 1.000% | 0.800% | 0.500% | 0.300% | 0.200% | 0.200% |
| 7 | 33.30% | 2.200% | 1.900% | 1.500% | 1.200% | 0.900% | 0.600% | 0.400% | 0.300% |
| 8 | 38.10% | 3.000% | 2.500% | 2.000% | 1.600% | 1.200% | 0.800% | 0.500% | 0.300% |
| 9 | 42.80% | 3.900% | 3.300% | 2.600% | 2.100% | 1.600% | 1.000% | 0.700% | 0.400% |
| 10 | 47.60% | 4.800% | 4.100% | 3.300% | 2.700% | 2.000% | 1.300% | 0.900% | 0.500% |
| 11 | 52.40% | 5.800% | 5.000% | 4.000% | 3.300% | 2.500% | 1.600% | 1.000% | 0.600% |
| 12 | 57.10% | 7.000% | 6.000% | 4.800% | 3.900% | 3.000% | 1.900% | 1.200% | 0.700% |
| 13 | 61.90% | 8.300% | 7.100% | 5.700% | 4.600% | 3.500% | 2.200% | 1.400% | 0.800% |
| 14 | 66.60% | 9.700% | 8.300% | 6.600% | 5.200% | 3.900% | 2.500% | 1.600% | 0.900% |
| 15 | 71.40% | 11.20% | 9.600% | 7.600% | 6.000% | 4.500% | 2.900% | 1.900% | 1.000% |
| 16 | 76.20% | 12.80% | 11.00% | 8.800% | 6.900% | 5.100% | 3.300% | 2.200% | 1.200% |
| 17 | 80.00% | 14.50% | 12.50% | 10.00% | 7.900% | 5.800% | 3.800% | 2.500% | 1.300% |
| 18 | 85.70% | 16.30% | 14.00% | 11.30% | 8.900% | 6.500% | 4.200% | 2.800% | 1.400% |
| 19 | 90.50% | 18.20% | 15.60% | 12.60% | 9.900% | 7.200% | 4.700% | 3.000% | 1.500% |
| 20 | 95.20% | 20.10% | 17.20% | 14.00% | 10.90% | 7.900% | 5.200% | 3.200% | 1.600% |
| 21 | 100.00% | 22.00% | 19.00% | 15.50% | 12.00% | 8.700% | 5.700% | 3.500% | 1.800% |
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Withholding personal income tax from your Iowa employee
Employers in Iowa are also responsible for withholding personal income tax (PIT), a state income tax on the income of Iowa residents. Also known as individual income tax, the amount is deducted from the employee’s wages and withheld by the employer. This tax is managed by the Iowa Department of Revenue, which may audit tax returns.
As of January 1, 2025, Iowa has moved to a flat income tax rate of 3.8% for all individual taxable income levels. This reform means there are no longer tax brackets, but the state income tax is still in effect.
Employers can remit withheld PIT through Iowa’s online portal. For more information on withholding personal income tax in Iowa, you can browse the Iowa Department of Revenue for relevant information.
Paying your Iowa workers' compensation
Workers’ compensation is another important payment to consider as an employer in Iowa, even if you only have one Iowa employee. The insurance plan is designed to help employees who are injured or fall ill while performing their job.
Workers’ compensation acts as wage replacement and medical benefits for employees who cannot work due to an unfortunate event during a job-related activity. It protects the employee from financial strain during recovery and reduces the legal risk to the employer.
In Iowa, workers’ compensation is typically purchased from a qualified commercial carrier. More information on qualified commercial carriers in Iowa can be found online. Employers should verify that their workers’ compensation insurance is compliant with the state’s regulations for workers’ compensation.
Need additional compliance support? A professional employer organization (PEO) can help. Read our guide to PEO Services in Iowa to learn more.
Deel PEO
Simplify US payroll tax compliance with Deel
If you’re an employer in Iowa, this guide provides valuable information on state-specific payroll taxes, compliance, and requirements. However, there’s a lot more information on regulations to consider.
To streamline the process and ensure full compliance, companies can turn to Deel US Payroll. For more compliance, benefits, and HR support, try Deel PEO.
Watch the video below to hear how Strada uses Deel US Payroll to streamline operations across the US.
Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can simplify your US payroll processes and ensure compliance with state regulations.
FAQs
What is the Iowa state tax withholding for 2025?
Iowa imposes a state personal income tax (PIT) ranging from 4.4% to 5.7%, applied to the employee’s entire taxable wage as of 2025.
How much tax does Iowa take out of a paycheck?
Employers withhold between 4.4% and 5.7% of an Iowa resident employee’s wages for state income tax, depending on the individual’s taxable income level.
Is Iowa getting rid of state income tax?
No, Iowa is not eliminating its state income tax for 2025. However, as of January 1, 2025, Iowa has moved to a flat income tax rate of 3.8% for all individual taxable income levels.
Is Iowa sales tax 7%?
The base Iowa state sales tax rate is 6%. In addition, most municipalities have a local option sales tax of 1%, bringing the total to 7% in many places. But the state rate itself is 6%—the 7% generally reflects the addition of local taxes
Is Iowa a no-income tax state?
No, Iowa is not a no-income-tax state. For 2025, individuals must pay a 3.8% flat state income tax rate.
Is property tax high in Iowa?
Property tax rates in Iowa are set at the local level and vary based on city and taxing authority. For the 2024–2025 fiscal year, urban residential property tax rates typically range from $15.67 to $17.85 per $1,000 of taxable value. For example, Muscatine sits at the lower end of that range ($15.67), while Council Bluffs is at the higher end ($17.85).
Whether these rates are considered “high” depends on your point of comparison—either against other states or your previous tax obligations. It’s also worth noting that many areas have seen increases in property tax bills due to rising assessed property values and adjustments to local levy rates.
Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
