Updated October 5, 2026. Quick answer: It depends on the kind of annuity. Iowa lets a filer “55 years of age or older on December 31, 2025” subtract qualified-plan annuity distributions, and the instructions say nonqualified annuities are not eligible. The rate is a flat 3.8%.
State retirement-income forms, line by line: Iowa retirement income exclusion.
How Iowa treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed at a flat rate; qualified-plan distributions subtracted at 55 or older |
| Rate | “Iowa now has a flat tax rate of 3.8%.” |
| What is subtracted | “Annuity distributions pursuant to IRC section 402(a).” Age 55 or older, disabled, or a qualifying survivor; no dollar cap is printed |
| Not eligible | The instructions list nonqualified deferred compensation plans and nonqualified annuities under “the following plans are not eligible for the retirement income exclusion” |
A $24,000 example
A filer 55 or older with $24,000 from a qualified plan annuity subtracts all of it, so it adds $0 of Iowa tax.
The same $24,000 from a nonqualified annuity is not eligible, so if the whole amount is taxable it is taxed at 3.8%, or $912, computed as $24,000 x 3.8%, before deductions.
What changes in 2026
The latest documents read print no 2026 change to the way annuity income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Iowa taxes pensions, how Iowa taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- IA 1040 Schedule 1 Expanded Instructions, tax year 2025 (Iowa Department of Revenue): https://revenue.iowa.gov/taxes/tax-guidance/individual-income-tax/1040-expanded-instructions/ia-1040-schedule-1
- Line 05: Iowa Tax, IA 1040 Expanded Instructions 2025 (Iowa Department of Revenue): https://revenue.iowa.gov/taxes/tax-guidance/individual-income-tax/1040-expanded-instructions/iowa-tax
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.