Updated October 16, 2026. Quick answer: Iowa excludes retirement income for eligible taxpayers (the guidance says it “excludes retirement income from Iowa taxable income for eligible taxpayers”), and it names “Eligible deferred compensation plans authorized under section 457(b) of the IRC” as qualifying; the guidance read does not name 403(b) plans.
State retirement-income forms, line by line: Iowa retirement income exclusion.
Iowa at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | 457(b) plans are named as qualifying; 403(b) plans are not named |
| Do the state’s documents name these plans? | The documents read name 457 plans but not 403(b) plans |
| Retirement exclusion or credit | Retirement income exclusion for those 55 or older, disabled, or qualifying survivors, with no dollar cap stated |
| Public-employee pension rule | Yes: the guidance lists governmental pension plans, including IPERS, as qualifying for the exclusion |
| Rate in the documents read | Flat 3.8% |
| Changed for 2026? | The exclusion applies for tax years beginning on or after January 1, 2023; the flat rate is 3.8% |
What the Iowa documents say
The Department of Revenue’s retirement income guidance sets an age condition: the taxpayer must be “55 years of age or older on December 31” of the tax year, or be disabled or a qualifying survivor. It says “Nonqualified deferred compensation plans described under section 409A of the IRC” do not qualify.
The 2025 instructions state the rate: “Iowa now has a flat tax rate of 3.8%”.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says that if you receive pension or annuity payments from a qualified employer retirement plan, “all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account”.
What the documents do not say
- The guidance read does not name 403(b) plans, so this page does not say whether one qualifies.
- The guidance page read is dated March 13, 2025 and applies the exclusion to tax years beginning on or after January 1, 2023; the 2025 what’s-new page supplies the rate.
Common mistakes
- Assuming Iowa’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Iowa taxes 401(k) and IRA withdrawals, Iowa retirement taxes, whether Iowa taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for retirement income
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your withdrawals
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Retirement Income Tax Guidance: https://revenue.iowa.gov/taxes/tax-guidance/individual-income-tax/retirement-income-tax-guidance
- IA 1040 Expanded Instructions: What’s New for 2025: https://revenue.iowa.gov/taxes/tax-guidance/individual-income-tax/1040-expanded-instructions/whats-new
- Iowa Code 2026, Section 422.7: https://www.legis.iowa.gov/docs/code/422.7.pdf
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.