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The statutory mission of the Iowa Department of Revenue is to serve
Iowans and support state government by collecting all taxes required by
law, but no more.
The Iowa Department of
Revenue (IDR) has announced that the annual interest rate for overdue taxes
and refunds in 2018 is 6 percent - which is the first change since 2010 - and
also released tax brackets and standard deductions for 2018.
What this means for taxpayers with overdue payments is that
beginning Jan. 1, 2018, a 6 percent annual interest rate (0.5 percent monthly) will
be added to late payments. However, taxpayers with overdue refunds from the
State will receive the same interest rate. The annual rate has not changed
since 2010, when it was set at 5 percent. The 2018 rate is effective Jan. 1, 2018 through
Dec. 31, 2018, for taxes which are overdue and for late refunds payable
during that time.
IDR calculates and publishes the statutory annual and monthly
interest rates each year in October. Also at this time, IDR determines and sets
forth the standard deduction amounts and tax brackets for the 2018 tax year.
Those are listed below.
Iowa Code Section 421.7 specifies 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 3.91 percent over the past twelve months. Rounding this
average to the nearest whole percent and 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.
IDR has also determined the tax brackets and standard
deduction amounts for the 2018 tax year, for income taxes due and payable in
calendar year 2019. These amounts are determined each year by applying
inflation factors to, or "indexing," the previous year's amounts. The
indexation of brackets and standard deduction amounts is meant to prevent
taxpayers from paying higher income taxes solely as a result of inflationary
impacts on incomes. Indexation of the standard income tax deductions is covered
in Iowa Code sections 422.9 and 422.21.
The tax year 2018 standard deduction for single taxpayers or
married taxpayers filing separately will be $2,030. The tax year 2018 standard
deduction for married filing jointly taxpayers will be $5,000.
Code section 422.5 details indexation of Iowa income tax
brackets. The tax year 2018 income tax brackets are shown below.
Taxable Income
Over; But Not Over; +; (Tax Rate; x; Of
Excess Over;)
$0; $1,598; $0.00; +; (0.36%; x
; $0)
$1,598; $3,196; $5.75; +;
(0.72%; x; $1,598)
$3,196; $6,392; $17.26; +;
(2.43%; x; $3,196)
$6,392; $14,382; $94.92; +;
(4.50%; x; $6,392)
$14,382; $23,970; $454.47; +;
(6.12%; x; $14,382)
$23,970; $31,960; $1,041.26; +;
(6.48%; x; $23,970)
$31,960; $47,940; $1,559.01; +;
(6.80%; x; $31,960)
$47,940; $71,910;
$2,645.65; +; (7.92%; x; $47,940)
$71,910; $4,544.07; +; (8.98%;
x; $71,910)
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