Why Iowa Doesn’t Have an Estate Tax
Read about the history of the Iowa estate tax and the reasons behind the state choosing to eliminate its estate tax.
Here’s a look at the history of the Iowa estate tax—and why it no longer exists. The topline good news: Iowa no longer has one. While some states still impose one or an inheritance tax, Iowa has moved away from both. But it wasn’t always this way.
Two factors contributed more than others to the state’s decision to repeal this tax:
- Economic Competitiveness: Iowa leaders wanted to make the state more attractive to retirees and families managing generational wealth. This does that.
- Simplification: Eliminating the estate tax simplified the probate process for families.
Today, Iowa is among a growing number of states that have decided not to impose these types of taxes—offering Iowans a more straightforward life planning experience.
Iowa once imposed both an estate tax and an inheritance tax. These are different. An estate tax is based on the total value of someone’s estate. An inheritance tax, on the other hand, is based on what individual heirs receive.
Iowa repealed its state estate tax in the early 2000s. Before that, the state followed what’s known as a pickup tax. This meant Iowa tied its estate tax directly to the federal tax. When the federal government phased out its credit for state estate taxes in 2005, Iowa’s estate tax effectively ended. So the answer is no: Iowa does not currently have an estate tax.
However, the inheritance tax stuck around for much longer. For years, Iowa residents still had to worry about inheritance taxes—even if there was no estate tax. That changed in 2021 when the Iowa legislature passed a law phasing out the inheritance tax over five years. By January 1, 2025, the tax was fully repealed.
(Read More: Learn about revocable trusts in Iowa versus Nevada.)