2023 Changes to Iowa's Retirement Taxes
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2023 Changes to Iowa's Retirement Taxes

 

In March of 2022 Iowa Governor Kim Reynolds signed a historic Iowa tax reform bill. One of the biggest changes from the bill is that starting in 2023, Iowans aged 55 or older are exempt from paying state taxes on retirement income. This includes 401(k) and IRA distributions, pension payments such as IPERS, FERS and private pensions, some annuity payments, and even Roth Conversions.

Previously there was an exemption for some retirement income ($6,000 for a single-filer and $12,000 for a married filer), but now the exemption is for all retirement distributions.

Other filers may qualify for the exemption as well, for example, if you are a beneficiary of a deceased persons retirement account who previously qualified.

Many retirees over age 55 have begun taking periodic or regular distributions from their retirement accounts and/or pensions. If you were previously withholding state taxes from your qualified distributions, you may want to consider reaching out to the custodian of those assets and have the state tax withholding turned off. As always, consult with your qualified tax professional before making any changes.

Other changes to the Iowa tax structure, which will be implemented through 2026, may affect your financial plans and retirement goals. Discuss with your tax advisor, and contact our office to discuss your specific situation.

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