IDR Announces 2021 Interest Rates, Deductions, Income Tax Brackets
Des Moines, Iowa – The Iowa Department of Revenue has finalized individual income tax brackets and individual income tax standard deduction amounts for the 2021 tax year (applicable for taxes due in 2022) and the 2021 interest rate, which the agency charges for overdue payments.
Interest Rates
Starting January 1, 2021, the interest rate for taxpayers with overdue payments will be:
- 6.0% annually
- 0.5% monthly
- 0.016438% daily
Iowa Code Section 421.7 specifies the procedures for calculating the Department’s annual and monthly interest rates. The annual rate is based on the average monthly prime rate during the preceding twelve month period, October through September. Iowa law requires that this average be rounded to the nearest whole percent and two percentage points to be added to it. The prime rate averaged 3.94 percent over the past twelve months. Rounded to the nearest whole percent, this average is 4.0 percent. Adding two percentage points results in the annual Department rate of 6.0 percent. The monthly rate is the annual rate divided by 12, rounded to the nearest one-tenth of a percentage point. The daily rate for 2021 is the annual rate divided by 365.
Individual Income Tax Standard Deductions
The tax year 2021 individual income tax standard deductions are:
- $2,130 for single taxpayers
- $2,130 for married taxpayers filing separately
- $5,240 for married filing jointly
Individual Income Tax Brackets
Tax year 2021 income tax brackets are shown in the table below.
Taxable Income |
Tax |
|||||
| Over | But Not Over | Tax Rate | Of Excess Over | |||
| $0 | $1,676 | $0.00 | + | (0.33% | x | $0) |
| $1,676 | $3,352 | $5.53 | + | (0.67% | x | $1,676) |
| $3,352 | $6,704 | $16.76 | + | (2.25% | x | $3,352) |
| $6,704 | $15,084 | $92.18 | + | (4.14% | x | $6,704) |
| $15,084 | $25,140 | $439.11 | + | (5.63% | x | $15,084) |
| $25,140 | $33,520 | $1,005.26 | + | (5.96% | x | $25,140) |
| $33,520 | $50,280 | $1,504.71 | + | (6.25% | x | $33,520) |
| $50,280 | $75,420 | $2,552.21 | + | (7.44% | x | $50,280) |
| $75,420 | ------ | $4,422.63 | + | (8.53% | x | $75,420) |
Iowa law provides for the indexation of individual income tax brackets and standard deduction amounts. These tax features are determined each year by applying inflation factors to, or “indexing,” the previous year’s amounts. Indexation of the standard deductions is covered in Iowa Code sections 422.9 and 422.21. Iowa Code section 422.5 details indexation of Iowa income tax brackets. Indexation is meant to protect taxpayers from paying higher income taxes solely as a result of inflation.
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