Complete Guide to Iowa LLC Taxes in 2025
Iowa has undergone dramatic tax reform in recent years, transforming from one of the highest-taxed states in the Midwest to a significantly more competitive jurisdiction. The 2024 tax reform reduced individual income tax rates to a graduated system ranging from 4.4% to 6%, down from the previous 8.53% top rate. Combined with no entity-level tax on LLCs and a $60 biennial report fee, Iowa now offers a more attractive environment for LLC owners. This guide covers everything you need to know about Iowa LLC taxes in 2025.
How Iowa Taxes LLCs
Iowa follows federal classification, treating LLCs as pass-through entities. Single-member LLCs report on Iowa Form IA 1040; multi-member LLCs file Iowa Form IA 1065 (informational) with K-1s to members. Iowa does not impose an entity-level tax, franchise tax, or gross receipts tax on LLCs.
Key Point: Iowa's tax reform dramatically simplified and reduced rates. The previous system had 9 brackets with a top rate of 8.53%. The 2024 system has just 3 brackets: 4.4%, 4.82%, and 6%. Iowa is scheduled to continue reducing rates, with the goal of reaching a flat 3.9% rate by 2026 -- which would make Iowa one of the lowest-tax states in the country.
Iowa Income Tax Brackets (2024/2025)
| Taxable Income (Single) | Rate |
|---|---|
| $0 - $6,210 | 4.40% |
| $6,211 - $31,050 | 4.82% |
| Over $31,050 | 6.00% |
For married filing jointly, the brackets are doubled ($12,420 and $62,100 thresholds).
Iowa's Path to a Flat Tax
Iowa's 2022 tax reform law (SF 2417) established a phased reduction to reach a flat 3.9% rate by 2026, contingent on revenue targets being met. The progression:
- 2023: 4.4% to 6.0% (4 brackets reduced to current 3)
- 2024: Same 3-bracket structure, 4.4% to 6.0%
- 2025: Continued reductions if revenue targets met
- 2026 (target): Flat 3.9% rate
Federal Taxes for Iowa LLC Owners
- Self-Employment Tax: 15.3% (12.4% SS + 2.9% Medicare + 0.9% surtax above thresholds)
- Federal Income Tax: 10-37% based on brackets
- QBI Deduction: Up to 20% under Section 199A
Tax Tip: With Iowa's rates dropping rapidly toward 3.9%, the relative benefit of S-Corp election varies by income. For 2025, LLC owners above $60,000 net income should evaluate S-Corp status. Use our S-Corp Tax Calculator to compare.
Iowa LLC Filing Requirements
Iowa LLCs file a Biennial Report with the Iowa Secretary of State. The fee is $60, due in odd or even years based on formation date. Iowa also requires LLCs to file a separate annual financial report if they have Iowa-source income.
Iowa LLC Filing Deadlines
| Filing | Deadline | Extension |
|---|---|---|
| Individual (IA 1040) | April 30 | Yes, to October 31 |
| Partnership (IA 1065) | April 30 | Yes, to October 31 |
| Biennial Report | April 1 (biennial) | No |
| Estimated Tax | Apr 30, Jun 30, Sep 30, Jan 31 | No |
Iowa vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| Iowa | 4.4-6% graduated | $60 biennial | None |
| Illinois | 4.95% flat | $75 | 1.5% replacement |
| Minnesota | 5.35-9.85% | $0 | None |
| Nebraska | 2.46-5.84% | $26 biennial | None |
| South Dakota | 0% | $50 | None |
| Missouri | 2-4.8% | $0 | None |
Common Iowa LLC Tax Mistakes
- Using old tax rates: Iowa's rates changed dramatically in 2023-2024. Ensure you're using the current 4.4-6% brackets, not the old 8.53% top rate.
- Missing Iowa's April 30 deadline: Iowa uses April 30, not April 15, for individual returns.
- Forgetting the biennial report: $60 every two years -- mark your calendar.
- Not planning for the flat rate transition: Iowa may reach 3.9% flat by 2026, affecting multi-year tax planning.
- Ignoring federal estimated payments: Iowa's quarterly dates differ slightly from federal dates.
Dissolving an Iowa LLC
File Articles of Dissolution with the Iowa Secretary of State ($5 online). Settle debts, file final returns, and retain records for at least three years.