As people prepare to file their Iowa income taxes this winter and spring, they’ll notice less of their money is going to their state government.

“For people that file now, they’re going to notice a drop to a 3.8 percent flat tax,” said state Sen. Tim Kraayenbrink, R-Fort Dodge.

Gov. Kim Reynolds and the legislature enacted a 3.8 percent flat tax rate for 2025. Workers may have noticed that less was being withheld from their paychecks throughout the year.

This is the first tax filing season that the tax cut has been in place.

Iowa for many years had a graduated income tax system with different tax brackets for different levels of income. The highest tax rate was 8.9 percent.

Reynolds and legislative Republicans enacted a reform a few years ago to gradually transition to a 3.8 percent flat tax. In 2024, they accelerated the process, enacting the 3.8 percent flat tax for 2025.

Kraayenbrink said that overtime pay, tips and Social Security income will not be taxed this year because Iowa is matching the federal tax rules that exempt those categories of income.