In the past week, the Governor signed Senate File 619 which repeals the Iowa inheritance tax over the next five years. Numerous attempts have been made over the past decade to eliminate or modify the Iowa inheritance tax. Pursuant to the bill, for persons dying in the year 2021, the Iowa inheritance tax will be reduced by twenty percent. For persons dying in the year 2022, the Iowa inheritance tax will be reduced by forty percent. For persons dying in the year 2023, the Iowa inheritance tax will be reduced by sixty percent. For persons dying in the year 2024, the Iowa inheritance tax will be reduced by eighty percent. For persons dying on or after January 1, 2025, the Iowa inheritance tax is repealed.
Under the former law which will be in effect until December 31, 2024, and which will be reduced as set out above, there is no Iowa inheritance tax for shares passing to parents, grandparents, great-grandparents, children, stepchildren, grandchildren, great-grandchildren, and other lineal ascendants and lineal descendants. For shares passing to brothers, sisters (including half-brothers and half-sisters), sons-in-law and daughters-in-law, the tax rate begins at five percent and ends at ten percent. For shares passing to uncles, aunts, nieces, nephews, foster children, cousins, brothers-in-law, sisters-in-law, and all other individual persons, the rate begins at ten percent and ends at fifteen percent. For shares passing to firms, corporations or societies organized for profit, including social and fraternal organizations that do not qualify under the Internal Revenue Code 170(c) or 2055, the rate is fifteen percent. For shares passing to charitable, educational or religious organizations, organized under the laws of any other state, territory, province or county, and bequests for religious services in excess of $500.00, the rate is ten percent. For shares passing to unknown heirs who are not presently ascertainable, due to contingent events, the rate is five percent. For shares passing to charitable, religious, educational or other organizations as defined in sections 170(c) and 2055 of the Internal Revenue Code, such are entirely exempt from inheritance tax. Also, for shares passing to public libraries, public art galleries, hospitals, humane societies, municipal corporations, and bequests for care of cemetery or burial lots of the decedent or the decedent’s family, as well as bequests for religious services not to exceed $500.00 in total, such are entirely exempt from inheritance tax.
The repeal of the Iowa inheritance tax follows the trend across the country to reduce such taxes. The hope is to convince more retirees to choose Iowa as their state of residence.
If you have questions or need assistance concerning inheritance taxes, please reach out to our office at (515) 225-1100 or through our contact page.