Iowa Payroll Changes - October 2024

Week Of 10.28.2024

Iowa Updated 2025 Withholding Tax Tables

The Iowa Department of Revenue released an updated income withholding formula and withholding tax tables, effective January 1, 2025. These changes include revised withholding calculations, new W-4 form requirements, and updated exemption thresholds. The Iowa withholding formula and IA W-4 have been revised for 2025 to implement a 3.80% flat tax rate and base deductions on marital status rather than allowances. Also, beginning in 2025, the deduction amount in Step 1 is determined based on the taxpayer’s marital status as reported on the IA W-4 rather than the allowances amount reported on the IA W-4. While employees are encouraged to file updated W-4 forms, employers can still use older forms with additional calculations for pre-2024 W-4s.

Iowa Unemployment Tax Rates Continue to Be Determined Under Lowest Rate Table in 2025

The Iowa Workforce Development (IWD) announced that unemployment tax rates will continue to be determined under Table 8 in 2025, the state's lowest tax rate table. Experience-rated employers: Tax rates under Table 8 range from 0% to 7% for experience-rated employers, though the 7% rate is for benefit ratio rank number 21. However, it is important to note that the rate for rank 20 is just 2.8%, a distinct difference from rank number 21. New employers: The new employer tax rates under Table 8 include new non-construction employers (1.0%, rank 12 of the table), new construction employers (7.0%, rank 21 of the table), and new government employers (0.1%). Taxable wage base: Although tax rate Table 8 will continue to be in effect, the taxable wage base will increase to $39,500 from $38,200 in 2024. As such, employers will pay taxes on an additional $1,300 in employee wages next year. Appeal of rate notice: Tax rates for 2025 are mailed to employers during November. Employers have 30 days to appeal this notice if they believe an error occurred in calculating the rate.

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