Does Iowa Tax Retirement Income? A Guide for Seniors 55+

As of 2023, Iowa excludes retirement income from state tax for eligible taxpayers, and being 55 or older is only one of four ways to qualify.1 This is a recent and sweeping change: distributions from pensions and IPERS, traditional and Roth IRAs, 401(k), 457(b), SEP, SIMPLE, Keogh, and ESOP plans are excluded for taxpayers who qualify. The exclusion is tied to the kind of plan the money comes from, though, not to retirement income in general. Income that falls outside the exclusion is taxed at Iowa's flat 3.8 percent rate, in place since tax year 2025, and the exclusion reaches your Iowa return only, not your federal one.1

This guide breaks down who qualifies for the exclusion, which plan types it reaches, and how pensions, IRA, and 401(k) income are treated after Iowa's recent overhaul.

In This Guide

• Iowa Retirement Income Tax at a Glance
• Iowa Retirement Income Tax: How It Works
• Social Security
• Who Qualifies: Age 55, Disability, and Survivors
• Pensions, IRAs, and 401(k)s
• Putting It Together
• Frequently Asked Questions
• Next Steps

Iowa Retirement Income Tax at a Glance

Iowa's rules became dramatically simpler in 2023. Distributions from a long list of retirement plans are excluded from Iowa taxable income if you meet one of the eligibility conditions, and the Department names two kinds of plans that are left out. What remains taxable is taxed at a single flat rate. The table below lays out each source.1

Iowa moved to a flat individual income tax of 3.8 percent for all levels of taxable income beginning with tax year 2025, with no brackets, and the Department announced the same 3.8 percent rate for tax year 2026.1 For a qualifying taxpayer, distributions from the listed plans never reach that rate, because they are excluded from taxable income first.

Iowa Retirement Income Tax: How It Works

Iowa overhauled its treatment of retirement income, and the result turns on two clean tests. The Iowa Department of Revenue confirms that beginning with tax year 2023, retirement income is excluded from Iowa taxable income for eligible taxpayers: those 55 or older on December 31 of the tax year, those who are disabled, a surviving spouse or a survivor having an insurable interest in someone who qualified on the basis of age or disability, and a surviving spouse receiving a deceased spouse's pension from employment in a protection occupation or as a sheriff, deputy sheriff, firefighter, or police officer, regardless of the deceased spouse's age or disability.1 The flat 3.8 percent rate adopted for 2025 simplifies whatever is left.

The breadth of the exclusion is the headline: it removes qualifying retirement income from Iowa taxable income.1 Two gates decide it: whether you meet one of the eligibility conditions above, and whether the money comes from a plan the Department lists as qualifying. Clear both, and that pension or account income is left off your Iowa return.

Social Security

Iowa's retirement income exclusion, the subject of this guide, covers distributions from the plans the Iowa Department of Revenue lists as qualifying, and Social Security benefits are not on that list.1 This guide does not cover how Iowa taxes Social Security benefits, so do not read the exclusion above as an answer either way.

If Social Security is the largest part of your income, confirm its treatment directly with the Iowa Department of Revenue or a tax professional before you plan around it.

Who Qualifies: Age 55, Disability, and Survivors

The centerpiece of the 2023 change is an exclusion of qualifying retirement income, and there are four separate routes into it.1 You qualify if you are 55 or older on December 31 of the tax year, or if you are disabled, or if you are a surviving spouse or a survivor having an insurable interest in someone who qualified on the basis of age or disability (the Department's guidance treats a survivor other than the spouse as having one if they are a son, daughter, mother, or father of the annuitant or pensioner; under the adopted rule, someone outside those close relationships must establish that they had a pecuniary interest in the decedent's continued life at the time of death), or if you are a surviving spouse receiving a deceased spouse's pension from employment in a protection occupation or as a sheriff, deputy sheriff, firefighter, or police officer, regardless of whether the deceased spouse was 55 or disabled.1 So an under-55 widow of a police officer, or a disabled 48-year-old, can qualify where the age route alone would say no.

For married couples, the exclusion applies only to the spouse who meets one of those conditions: if one spouse does not, the retirement income attributable to that spouse is not eligible, and if both do, the couple may exclude all eligible retirement income.1

The exclusion is tied to the type of plan, not to retirement income at large. The Department has determined that distributions from these plans qualify: traditional IRAs and Roth IRAs, Roth conversion income, SEP and SIMPLE plans, 401(k) and other qualified deferred compensation plans, eligible 457(b) plans, defined benefit, pension, profit-sharing, and stock bonus plans including IPERS and ESOPs, Keogh plans, and eligible combined plans under section 414(x).1 The Department names two categories that do not qualify: nonqualified deferred compensation plans under section 409A, and nonqualified annuities.1 The adopted rule describes both lists as nonexclusive, so a plan that appears on neither is not settled by the lists alone; ask the Department before you count it in or out.1 IPERS, the Iowa Public Employees' Retirement System, is on the qualifying list by name, so an IPERS pension is excluded for anyone who meets one of the four conditions.1

If none of the four conditions fits you, the exclusion does not apply and your retirement income distributions remain taxable at Iowa's flat 3.8 percent rate.1 Check all four before you assume that, though; age is one route, not the only one.

Pensions, IRAs, and 401(k)s

Beginning with tax year 2023, pensions, IPERS, IRA withdrawals, and 401(k) and 457(b) distributions are all excluded for qualifying taxpayers.1 The same applies to SEP and SIMPLE accounts, Keogh plans, and ESOPs. Nonqualified annuity income is one of the two categories the Department names as not qualifying.1

For retirees who built their savings in private accounts rather than a government pension, this is the part of the change to focus on. IRA and 401(k) withdrawals are excluded for anyone who meets one of the four conditions.1 The practical effect is that a qualifying retiree can draw down a 401(k) to cover living costs or care without owing Iowa income tax on those withdrawals. Iowa's exclusion is a state exclusion only, though. A traditional IRA distribution is still taxed as ordinary income on your federal return, and a Roth IRA distribution stays out of federal gross income if it is a qualified distribution or a return of your regular contributions; part of any other Roth distribution may be taxable.2 Payments from a qualified employer plan such as a 401(k) may also still be taxable federally, in whole or in part, unless the payment is a qualified distribution from a designated Roth account, so budget for the federal bill separately.1

If you are weighing how much to draw from these accounts to cover care, retirement accounts for care walks through the tradeoffs.

Putting It Together

The practical takeaway: since tax year 2023, a qualifying taxpayer can exclude pension, IPERS, IRA, and 401(k) income from Iowa taxable income, and from tax year 2025 on, the flat 3.8 percent rate reaches only income outside the exclusion, such as payments from a nonqualified annuity.1

Picture a single retiree, age 60, drawing $45,000 from a traditional 401(k). Under the current rules, the entire $45,000 withdrawal is excluded because the retiree is 55 or older and a 401(k) is a qualifying plan, so Iowa income tax on that withdrawal is zero.1 On the federal return, all or part of that withdrawal can still be taxable.1 The figures here are hypothetical and shown only to illustrate how the exclusion works; they are not a real case and not a prediction of your own outcome.

This is general information rather than personalized tax advice, and whether your specific plan type and filing situation qualify is exactly the kind of detail worth confirming with the Iowa Department of Revenue or a tax professional before you plan withdrawals. If retirement savings are part of how you will fund care, building a senior care funding plan is a useful next step.

Next Steps

If you are retired in Iowa, the 2023 change can take your plan distributions off your Iowa return, but confirm you qualify first. Qualifying retirement income is excluded for taxpayers who meet any one of the four conditions, not for the 55-and-older group alone.1

• Check all four routes, not just age: 55 or older on December 31, disabled, a surviving spouse or survivor with an insurable interest, or a surviving spouse drawing a deceased spouse's pension from employment in a protection occupation or as a sheriff, deputy sheriff, firefighter, or police officer.
• Check each spouse separately if you are married; the exclusion applies only to the spouse who meets a condition.
• List your plan types to confirm each is on the Department's qualifying list, from IPERS to 401(k) to SEP and SIMPLE. The lists are nonexclusive, so ask about any plan named on neither.
• Remember the change is recent (tax year 2023), so update any older planning assumptions.
• Confirm with the Iowa Department of Revenue at revenue.iowa.gov if your income type is unusual.

If you are mapping out how to pay for care, how to pay for senior care covers the main routes.

Learn More

Find personalized help making sense of the Iowa retirement income tax at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.