Iowa Estate Taxes
Iowa has an estate tax that is intended to absorb the maximum credit against the federal estate tax. It also has a layered inheritance tax system. The amount of tax imposed depends on who gets what after you are gone, according to the following classes of beneficiaries:
- Class 1: Any portion of the net taxable estate passing to a surviving spouse, parents, grandparents and other lineal ascendants, children (including legally adopted children or biological children entitled to inherit under the laws of the state), stepchildren, grandchildren, great-grandchildren, and other lineal descendants is completely exempt from tax.
- Class 2: Transfers involving a decedent's brother, sister, son-in-law, or daughter-in-law are not exempt from tax. Such transfers are taxed according to the table below.
- Class 3: This category includes any person not included in Class 1 or Class 2 above. For those that fall under this class, the transfer is taxed per the rates in the table below.
- Class 4: This class includes transfers to institutions organized in other states, for charitable, educational, or religious purposes, or resident trustees for use outside the state. The entire amount passing to such an institution or trustee is taxed at the rate of 10 percent, unless an amount qualifies under the state's charitable exemptions.
- Class 5: Included here are firms, corporations, or societies organized for profit. Transfers to members of this class are taxed at the rate of 15 percent of the value of the amount transferred.
| Iowa Inheritance Tax Rates for Individual Beneficiaries |
| Value of Property Passing to Class |
Class 2 Tax on Col. (1) |
Class 2 Rate on Excess |
Class 3 Tax on Col. (1) |
Class 3 Rate on Excess |
| (1) |
(2) |
(3) |
(4) |
(5) |
(6) |
| $0 |
$5,000 |
$0 |
5% |
$0 |
10% |
| $5,000 |
$12,500 |
$250 |
5% |
$500 |
10% |
| $12,500 |
$25,000 |
$625 |
6% |
$1,250 |
10% |
| $25,000 |
$50,000 |
$1,375 |
7% |
$2,500 |
10% |
| $50,000 |
$75,000 |
$3,125 |
7% |
$5,000 |
12% |
| $75,000 |
$100,000 |
$4,875 |
8% |
$8,000 |
12% |
| $100,000 |
$150,000 |
$6,875 |
9% |
$11,000 |
15% |
| $150,000 |
and above |
$11,375 |
10% |
$18,500 |
15% |
Deductions. The following items can be deducted from a resident decedent's estate when calculating Iowa estate tax liability:
- decedent's debts
- local and state taxes accrued prior to death
- federal estate tax and other federal taxes owed by the estate
- court costs
- a reasonable sum for funeral expenses
- allowance for the surviving spouse and minor children granted by the probate court or judges
- appraisement costs
- court-approved attorney's fees
- personal representative's fee
- amount paid to the personal representative for a bond
- costs for selling realty or personal property of the estate
- expenses for abstracting, documentary stamps, and title correction costs
Before a deduction can be taken, a personal representative must certify that an expense or liability has been paid or that the Director of Revenue and Finance is satisfied that it will be paid. If a resident's estate includes property located outside Iowa, the liabilities subject to deduction must be prorated and only the Iowa portion of the liabilities is deductible. Similarly, a nonresident's estate can only take deductions for debts and expenses based on the value of the property within Iowa relative to the value of the entire estate.
Returns. The District Court where the decedent was a resident or where the property of a nonresident decedent is located has jurisdiction to hear and determine all tax questions. A copy of the service of appraisement must be filed with the Clerk of the District Court, who then files a copy with the Director of Revenue and Finance.
Those required to file an inheritance tax return (Form IA706) with the Department of Revenue and Finance must generally pay any taxes owed within nine months of the decedent's death. Nonresident returns consist of an inventory that must be filed with the Department, which then computes the tax.
Generation-skipping transfer tax. Iowa imposes a generation-skipping transfer tax equal to the federal credit.
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