Iowa Corporate Income Tax Changes for 2021

In 2018, Governor Reynolds signed Senate File 2417, which phases in changes to Iowa’s income tax code over several years. This law includes several changes to Iowa corporate income tax that take effect for tax years beginning on or after January 1, 2021.

Corporate Income Tax Rates Reduced

Effective for tax years beginning on or after January 1, 2021, Iowa corporate income tax rates are reduced and the number of corporate income tax brackets decreases from 4 to 3.

New Iowa Corporate Income Tax Rates for 2021

Bracket Tax Rate
$0 - $100,000 5.5%
$100,001 - $250,000 9%
Over $250,000 9.8%
  • For tax years beginning during the 2021 calendar year (tax year 2021), the Iowa deduction for federal income taxes paid by a corporation is allowed only to the extent the payment was for taxes due for a tax year beginning prior to January 1, 2021.

    The Iowa deduction for federal income tax paid is limited to 50% of the qualifying federal tax payments made during tax year 2021.

    Corporations are also required to add back any federal income tax refunds received during tax year 2021 to the extent the payment of the taxes refunded was deducted on a prior year Iowa return.

    This deduction is not available for tax years beginning on or after January 1, 2022.

  • Iowa Corporate AMT Repeal

    The Iowa corporate AMT has been repealed for tax years beginning on or after January 1, 2021. No Iowa corporate AMT will be imposed for tax years beginning on or after that date. The IA 4626 and IA ACE Worksheet have been eliminated due to this change.

    Iowa Corporate AMT Credit - Final Year

    The repeal of the Iowa corporate AMT includes a final transition year in which taxpayers may utilize any remaining AMT credit. For tax years beginning during tax year 2021, corporations may utilize any remaining credit for Iowa AMT paid in a prior year, up to the taxpayer’s regular tax liability for tax year 2021.

    The Iowa AMT credit is not available to corporations for tax years beginning on or after January 1, 2022. No refunds or credits will be issued or allowed for any AMT credit that the taxpayer is not able to use for a tax year beginning before that date.

  • In addition to the changes described above, the Governor signed Senate File 619 in 2021, which, in part, conforms Iowa to the additional first-year depreciation under IRC section 168(k) (bonus depreciation) for property placed in service during tax years beginning on or after January 1, 2021.

    Iowa taxpayers who claim the additional first-year depreciation under IRC section 168(k) for federal purposes in tax year 2021 or later will not need to make depreciation adjustments on their Iowa returns for those assets. Iowa-specific depreciation adjustments may still be required for property placed in service in prior years when Iowa did not conform with bonus depreciation or certain other federal expensing and depreciation provisions.

    This law change applies to both individual and corporate income taxes and to franchise taxes (including pass-through entities).