Governor Signs Tax Bill – ABI Priorities Become Law

As has been widely reported, on June 16,2021, Iowa Governor Reynolds signed into law SF619, the centerpiece of the 2021 legislative session. The bill brings certainty to income tax cuts passed in 2018 but not yet enacted, eliminates the state inheritance tax over time, aids families with childcare and housing by providing incentives to both through tax credits, couples state tax policy with federal action to provide bonus depreciation of major assets. The bill also provides property tax relief the elimination of the county mental health levy and the replacement of those funds with state dollars. Not all of the changes will take effect immediately. Here are the pertinent dates: 

Reduction in income taxes from a high of 8.53% to 6.5%, reduction in the number of tax brackets from 9 to 4 and the elimination of federal taxes paid from state tax liability – Effective January 1, 2023 

Phase out the inheritance tax by 20% per year beginning January 1, 2021 until fully eliminated on January 1, 2025 

Increase income eligibility for childcare tax credits from $45,000 to $90,000 – Retroactive to January 1, 2021 

Increase the available amount of workforce housing tax credits from $25 million to $35 million – Effective July 1, 2021 

State bonus depreciation to match federal policy – Retroactive to January 1, 2021 

Eliminate the Mental Health property tax levy over two years beginning July 1, 2021