Iowa 2025-2026 Regular Session

Iowa House Bill HF496

Introduced
2/20/25  

Caption

A bill for an act modifying the individual and alternate income tax rates, and including applicability provisions.

Impact

The implementation of HF496 would take effect for tax years beginning on or after January 1, 2026, establishing a timeline for individuals and tax authorities to prepare for the new rates. Proponents of the bill argue that this tax cut will enhance financial relief for citizens, particularly during a period when economic conditions may necessitate increased consumer spending and investment. However, the potential reduction in state revenue raises concerns about the capacity for public services and programs dependent on income tax collections.

Summary

House File 496 proposes modifications to the individual and alternate income tax rates within Iowa State's tax code. The bill specifically aims to decrease the standard income tax rate from 3.8% to 2.5%, while also reducing the alternate income tax rate from 4.3% to 3.0%. This change is significant, as it represents a direct reduction in tax obligations for both residents and non-residents earning taxable income in Iowa. Such a reduction aims to stimulate economic activity by increasing disposable income among individuals.

Contention

As with many tax policy modifications, HF496 is likely to face scrutiny regarding its long-term implications on state funding. Opponents might argue that while the tax cut could provide immediate financial benefits to individual taxpayers, it could lead to significant challenges in funding essential state functions, such as education and public safety. Further debate might center on whether the tax relief disproportionately favors higher-income individuals, potentially exacerbating income inequality within the state.

Companion Bills

No companion bills found.

Previously Filed As

IA SF2398

A bill for an act relating to state taxation by modifying alternate and individual income tax rates, and including effective date and retroactive applicability provisions.(Formerly SSB 3038.)

IA SF552

A bill for an act relating to individual and corporate income taxes, the insurance premium tax, and including the contingent repeal of the individual income tax, and including retroactive applicability and effective date provisions.(Formerly SSB 1126.)

IA HSB720

A bill for an act relating to state taxation by modifying future individual income tax rates, creating processes for reducing the individual income tax rate to zero, reducing future contingent corporate income tax rates, making appropriations, and including effective date, applicability, and retroactive applicability provisions.

IA SSB3141

A bill for an act relating to state taxation by modifying future individual income tax rates, creating processes for reducing the individual income tax rate to zero, reducing future contingent corporate income tax rates, making appropriations, and including effective date, applicability, and retroactive applicability provisions.

IA HF2705

A bill for an act relating to state and local finances by modifying individual and alternate income tax rates, withholding credits, franchise tax deductions, methodologies for determining property taxes, and property tax assessment limitations, changing methods of determining compensation of county officials, making contingent transfers from the taxpayer relief fund, and making corrections, and including effective date and applicability provisions.(Formerly HSB 752.)

IA SSB3207

A bill for an act relating to state and local finances by modifying individual and alternate income tax rates, withholding credits, franchise tax deductions, methodologies for determining property taxes, and property tax assessment limitations, changing methods of determining compensation of county officials, making contingent transfers from the taxpayer relief fund, and making corrections, and including effective date and applicability provisions.(See SF 2442.)

IA HSB752

A bill for an act relating to state and local finances by modifying individual and alternate income tax rates, withholding credits, franchise tax deductions, methodologies for determining property taxes, and property tax assessment limitations, changing methods of determining compensation of county officials, making contingent transfers from the taxpayer relief fund, and making corrections, and including effective date and applicability provisions.(See HF 2705.)

IA SF2442

A bill for an act relating to state and local finances by modifying individual and alternate income tax rates, withholding credits, franchise tax deductions, methodologies for determining property taxes, and property tax assessment limitations, changing methods of determining compensation of county officials, making contingent transfers from the taxpayer relief fund, and making corrections, and including effective date and applicability provisions. (Formerly SSB 3207.) Effective date: Enactment, 05/01/2024, 07/01/2024, 01/01/2025. Applicability date: 01/01/2024, 01/01/2025, 07/01/2025.

IA SSB1126

A bill for an act relating to individual and corporate income taxes, the insurance premium tax, and including the contingent repeal of the individual income tax, and including effective date provisions.(See SF 552.)

IA HSB543

A bill for an act relating to state taxation and appropriations by combining special purpose funds, modifying individual income tax rates, placing assessment limitations for property tax purposes on commercial child care facilities, and modifying unemployment benefits, and including effective date and retroactive applicability provisions.

Similar Bills

No similar bills found.