Budget & Taxes (Income Tax)

SSB 1239 proposes to eliminate Iowa's individual income tax and alternate income tax, affecting all individual taxpayers. It establishes a "taxpayer relief trust fund" and an "income tax elimination fund," along with an "income tax elimination board" to oversee this process. The bill mandates the transfer of state funds, including an initial $2.6 billion, into the taxpayer relief trust fund. These funds, to be administered by the Iowa Public Employees’ Retirement System (IPERS), are intended to generate investment returns to support the future elimination of the individual income tax.

House File 132 creates an individual income tax credit for taxpayers who purchase firearm safety devices. This credit is equal to the sales price of the device, up to a maximum of $500 per tax year. A "firearm safety device" includes mechanisms designed to prevent a firearm from being operated without deactivation, or new, steel gun safes purchased for personal use from licensed dealers or retailers. Any unused credit can be carried over to the following tax year, and the bill applies retroactively to purchases made on or after January 1, 2025.

HF 1024 proposes to exclude overtime pay from the individual income tax in Iowa. This bill directly affects individuals who earn compensation at a rate of one and a half times their regular pay by allowing them to subtract this income from their taxable earnings. The bill amends the state's tax code to implement this exclusion. If enacted, these provisions would apply to tax years beginning on or after January 1, 2026.

HF 1030 proposes to exempt certain cash tips from the individual income tax for qualifying Iowans. Individuals whose net income is less than $155,000 could subtract up to $25,000 in "qualified tips" from their taxable income. "Qualified tips" are defined as cash tips received in occupations that traditionally and customarily received cash tips before December 31, 2023. This exemption would apply to tax years beginning on or after January 1, 2026, unless the federal government enacts similar legislation.