The Iowa Department of Revenue is issuing updated income tax withholding formulas and tables for 2021 to continue to align Iowa withholding with recent changes in state tax laws.
For individuals, this means that employers will be reducing the amount of Iowa tax withheld from employees’ paychecks, beginning January 1, 2021, increasing take-home wages for individuals.
Prior to 2019, withholding tables had remained unchanged since 2006. Changes to the withholding tables are intended to align the amount of income tax employers remit to the state with individual income tax cuts included in SF 2417, an extensive state tax reform bill signed into law by Iowa Governor Kim Reynolds in the spring of 2018. Since 2019, the Department has been adjusting the withholding formulas and tables as needed to reflect the phasing in of Iowa tax reform.
Employers can find the new Iowa 2021 withholding formulas and tables online.
The Department has updated the online Withholding Calculator to help individuals calculate their 2021 withholding amounts. As a reminder, employers will update withholding amounts starting January 1, 2021 but employees can also make changes to their Iowa W-4 (withholding) form by contacting their employer.
Employers with questions can contact the Department at 515-281-3114 or 800-367-3388.