Navigating payroll taxes in Iowa involves understanding both federal and state tax obligations to ensure compliance. This guide provides a detailed and structured overview of the regulations, requirements and payroll taxes applicable in Iowa, such as paying unemployment insurance, withholding personal income tax, and workers’ compensation.

Overview of Payroll Taxes in Iowa

Employers in Iowa are responsible for managing several types of payroll taxes, including federal income tax, FICA taxes (Medicare and Social Security), and 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 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.

Paying unemployment insurance

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%