HF 496 (LSB 1926YH (6) 91)

HOUSE FILE 496

BY  JACOBY

A BILL FOR

An Act modifying the individual and alternate income tax rates, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.5, subsection 1, paragraph a, Code 2025, is amended to read as follows:
   a.  A tax is imposed upon every resident and nonresident of the state which tax shall be levied, collected, and paid annually upon and with respect to the entire taxable income as defined in this subchapter at a rate of three and eight-tenths two and one-half percent.
    Sec. 2.  Section 422.5, subsection 2, paragraph b, Code 2025, is amended to read as follows:
   b.  In lieu of the computation in subsection 1, or in paragraph “a” of this subsection, if the married persons’ filing jointly, head of household’s, or surviving spouse’s net income exceeds thirteen thousand five hundred dollars, the regular tax imposed under this subchapter shall be the lesser of the alternate state individual income tax rate of four and three-tenths three percent times the portion of the net income in excess of thirteen thousand five hundred dollars or the regular tax liability computed without regard to this sentence. Taxpayers electing to file separately shall compute the alternate tax described in this paragraph using the total net income of the spouses. The alternate tax described in this paragraph does not apply if one spouse elects to carry back or carry forward a net operating loss as provided under the Internal Revenue Code or in section 422.9.
    Sec. 3.  Section 422.5, subsection 3, paragraph b, Code 2025, is amended to read as follows:
   b.  In lieu of the computation in subsection 1 or 2, if the married persons’ filing jointly, head of household’s, or surviving spouse’s net income exceeds thirty-two thousand dollars, the regular tax imposed under this subchapter shall be the lesser of the alternate state individual income tax rate of four and three-tenths three percent times the portion of the net income in excess of thirty-two thousand dollars or the regular tax liability computed without regard to this sentence. Taxpayers electing to file separately shall compute the alternate tax described in this paragraph using the total net income of the spouses. The alternate tax described in this paragraph does not apply if one spouse elects to carry back or carry forward a net operating loss as provided under the Internal Revenue Code or in section 422.9.
    Sec. 4.  APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2026.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill decreases the individual income tax rate on taxable income from 3.8 percent to 2.5 percent, and correspondingly reduces the alternate income tax rate from 4.3 percent to 3.0 percent.
   The bill applies to tax years beginning on or after January 1, 2026.