How Federal Estate Taxes and Iowa’s Inheritance Taxes Could Affect Your Estate

For 2024, the current federal estate tax exemption is approximately $13.61 million per individual. That means if the total value of your estate is less than $13.61 million, your estate is not subject to federal estate taxes. The total tax exemption is $27.22 million for a married couple.

While the lifetime exclusion of $13.61 million will shield most individuals from federal estate taxes, in addition to the estate tax, some states also have inheritance taxes; Iowa is one of those states. The amount of Iowa's inheritance tax is based upon the relationship between the decedent and the beneficiary of the decedent's property. For instance, surviving spouses, children, stepchildren, grandchildren, great-grandchildren, parents, grandparents, great-grandparents and other lineal descendants of the decedent are all exempt from the tax. This means that if you receive property from a parent or spouse who passed away, there is no inheritance tax.   

However, there is no such exemption for a brother, sister, brother-in-law, sister-in-law, aunt, uncle, niece, nephew, cousin, or friend of the decedent.  Any property left to those individuals will be subject to a tax at a rate of 5% to 15%.

In 2021, the Iowa legislature passed legislation to repeal the inheritance tax in 2025. Up until that time, 2021-2024, there will be a phase-out period, where the tax rate is reduced 20% each year.

If you would like more information about estate and inheritance taxes or have questions about creating or revising your will or estate plan, feel free to contact the Crimmins & Kehm Law Firm at 515-573-2191.