Selling a business in Iowa: what the state takes (2026)
Iowa’s top individual income tax rate is 3.8%. Here is what an owner selling company stock pays, with 2026 rules from official sources and worked examples at $10 million, $25 million and $50 million.
- 3.8%
- Top Iowa income tax rate (2026)
- $950,000
- State tax on a $25M long-term gain
- 27.6%
- Combined federal and state rate on $25M
- 33 of 51
- Rank by total tax on $25M (1 = highest)
How Iowa taxes a business sale
- Income tax
- Top rate 3.8%: Flat rate on all taxable income.
- Long-term capital gains
- Capital gains are taxed as ordinary income at the flat 3.8% rate. Iowa's former capital gain deduction for selling a business (10-year holding and material participation) was repealed for sales on or after January 1, 2023, except for installment sales from earlier sales.
- Relief that applies only in some sales
- Two narrow deductions remain. (1) Capital stock election (IA 100J): a one-time lifetime election to deduct 100% (from 2025) of gain on stock of one corporation, but only stock acquired on account of employment. Stock received at formation for a capital contribution does not qualify, and the corporation must have had Iowa employees, at least five shareholders and at least two unrelated shareholder groups for the prior 10 years. (2) Farm real property, breeding livestock and retired-farmer sales. A founder selling their own company usually does not qualify.
- Entity-level taxes
- S corporations generally pass income through; the deduction does not apply to asset sales by a C corporation.
- Local taxes
- School districts (instructional support and other levies) and counties (EMS surtax, up to 1%) can impose an income surtax on residents equal to a percentage of their state income tax. The combined surtax is capped at 20% of state tax, so at most about 0.76% of taxable income (20% x 3.8%); actual district rates vary and most are lower.
Three worked examples
| Long-term gain | $10,000,000 | $25,000,000 | $50,000,000 |
|---|---|---|---|
| Federal capital gains tax (20%) | $2,000,000 | $5,000,000 | $10,000,000 |
| Net investment income tax (3.8%) | $380,000 | $950,000 | $1,900,000 |
| Iowa tax | $380,000 | $950,000 | $1,900,000 |
| Total tax | $2,760,000 | $6,900,000 | $13,800,000 |
| Effective combined rate | 27.60% | 27.60% | 27.60% |
| Net proceeds after tax | $7,240,000 | $18,100,000 | $36,200,000 |
| Extra tax versus Texas | $380,000 | $950,000 | $1,900,000 |
Seller’s tax calculator
Estimate federal and state tax on a stock sale and what is left before fees and debt.
- Long-term capital gain
- $25,000,000
- Federal capital gains tax (20%)
- $5,000,000
- Net investment income tax (3.8%)
- $950,000
- Iowa tax
- $950,000
- Taxable gain at 3.8%
- $950,000
- Total tax
- $6,900,000
- Effective rate on the gain
- 27.60%
- Net proceeds after tax
- $18,100,000
Illustration, not tax advice. Assumes a resident individual, the whole gain long-term, top marginal rates, no state credits, installment terms, QSBS exclusion or other planning, and no local taxes. Net proceeds are before transaction fees, debt repayment, escrows and earn-outs. Rates are for tax year 2026 where published; see the methodology.
Compare with other states
Neighboring states
Common comparisons
- California37.1% combined, $15.72M net
- New York34.1% combined, $16.48M net
- Texas23.8% combined, $19.05M net
- Florida23.8% combined, $19.05M net
- Nevada23.8% combined, $19.05M net
- Washington33.5% combined, $16.63M net
- Tennessee23.8% combined, $19.05M net
Methodology and sources
Iowa figures are for tax year 2026. Iowa DOR announced in October 2025 that all 2026 taxable income is subject to the flat 3.8% rate under SF 2442 (2024). The examples assume a resident individual selling privately held stock for a long-term gain equal to the sale price (zero basis), with every dollar taxed at the top marginal rates, the federal 20% capital gains rate and the 3.8% net investment income tax, and no planning, credits or local taxes. Full assumptions are in the report methodology.
All 50 states and DC with source URLs.
- 1Iowa DOR press release, 2026 individual income tax and interest rates
- 2Iowa DOR 41-161 'Before You Complete the Applicable Iowa Capital Gain Deduction Form' (08/21/2025)
- 3Iowa DOR 2024 IA 100J Capital Stock Election and instructions
- 4Iowa Code 2026, s. 257.21 (instructional support income surtax)
- 5Iowa Code 2026, s. 298.14 (20% cap on school district income surtaxes)
- 6Iowa Code 2026, s. 422D.2 (county EMS income surtax)
- 7Tax Foundation, State Individual Income Tax Rates and Brackets, 2026. Secondary source
Data last updated October 26, 2026.
Cite this research
You may quote and republish figures from this page with attribution and a link to the source.
Citation
Laurent Capital Research, “The Seller’s Tax Map: What Selling a Business Costs in Every State (2026): Iowa,” 2026, https://laurent.capital/research/seller-tax-map/iowaLink (HTML)
<a href="https://laurent.capital/research/seller-tax-map/iowa">The Seller’s Tax Map: What Selling a Business Costs in Every State (2026): Iowa</a> (Laurent Capital)Planning a sale and weighing the tax cost?
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