The Iowa bonus tax calculator at the top of this page helps employers quickly estimate the net (take-home) pay employees should receive for bonus payments, using the state’s flat income tax rate.
Behind the numbers
Behind the numbers
Updated: July 12, 2025
Does Iowa tax bonuses?
Yes. Bonuses are considered taxable income and are subject to Iowa’s standard income tax withholding rules. Employers are responsible for withholding the correct amount and remitting it to the Department of Revenue. According to the Iowa Department of Revenue, supplemental wages include bonuses, overtime pay, commissions, and other special payments made in addition to regular wages. If federal tax is withheld at a flat rate, Iowa requires withholding at the state’s highest individual income tax rate of 3.8%. However, if the bonus is paid together with regular wages, the total amount should be taxed using Iowa’s standard withholding tables or formulas.
How to calculate bonus tax in Iowa
If the bonus is paid separately, employers can withhold at a flat 3.8%. If the bonus is combined with regular wages, the total amount should be taxed using Iowa’s regular withholding tables.
How can employers in Iowa pay bonuses to employees?
Bonuses can be paid via:
- Check
- Direct deposit
- Pay card
Why are bonuses taxed differently than standard pay?
They’re not — unless paid separately, bonuses are taxed the same as regular wages.
What is the bonus tax rate in Iowa?
As of 2025, Iowa uses a flat income tax rate of 3.8%.
How do bonuses work in Iowa?
Bonuses must be reported and withheld like any other compensation. If paid separately, employers should clearly identify them.
How much tax is taken out of a bonus in Iowa?
3.8% state + 22% federal = 25.8%, not including FICA.