News : IDR Announces 2025 Individual Income Tax Brackets and Interest Rates

The Iowa Department of Revenue announces the 2025 tax year individual income tax rate and the 2025 interest rate, which the agency charges for overdue payments.

Individual Income Tax Rate
Since the enactment of Iowa Senate File 2442 in May, 2024, Iowa law provides for a flat tax rate of 3.8 percent for all levels of taxable individual income beginning with tax year 2025. There will be no income tax brackets in 2025.

Iowa Department of Revenue Interest Rate
Starting January 1, 2025, the interest rate for taxpayers with overdue payments will be:
* 10.0% annually
* 0.8% monthly
* 0.027397 % daily

Iowa Code Section 421.7 specifies the procedures for calculating the Department's annual and monthly interest rates. The annual rate is based on the average monthly prime rate during the preceding twelve month period (October through September). Iowa law requires that this average be rounded to the nearest whole percent and two percentage points to be added to it. The prime rate averaged 8.48 percent over the past twelve months. Rounded to the nearest whole percent, this average is 8.0 percent. Adding two percentage points results in the annual Department rate of 10.0 percent. The monthly rate is the annual rate divided by 12, rounded to the nearest one-tenth of a percentage point. The daily rate for 2025 is the annual rate divided by 365. The average monthly bank prime rate is published by the United States Federal Reserve.