Iowa LLC Taxes

The generally low cost of living in Iowa makes the state a popular location for new businesses. Yet, many entrepreneurs may find it challenging to understand the business taxes involved in starting a new venture in Iowa. 

Whether your business is new or has been open for years, if you operate a limited liability company (LLC) in Iowa, you must stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you’ll need to pay for your Iowa LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

Iowa LLC Taxes Owed

LLCs benefit from pass-through taxation, which means the business’s profits pass through to its members’ individual tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of Iowa. Instead, LLC owners must pay taxes on their portion of the income generated by the LLC. 

In Iowa, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.

Iowa State Taxes

Like all states, Iowa has its own laws that govern how it taxes individuals and businesses. Below are some important state-level laws likely to affect your Iowa LLC.

Iowa Income Taxes

Iowa’s state income tax rate is 6%. This means you’ll have to pay the state 6% of your earnings in addition to paying federal income tax.

Iowa Sales and Use Tax

Iowa has a state sales tax rate of 6%. Depending on your location, though, you may have to pay local sales taxes on top of this. The average local sales tax rate is 0.94%, which is relatively low. Check with your local jurisdiction to determine if a local sales tax will impact your LLC.

Register for an Iowa Sales Tax License

If your business sells taxable goods or services, you must register for an Iowa sales tax license with the Iowa Department of Revenue. You can do this via IASourceLink, a partner of the Iowa Department of Revenue.

Additional State Taxes

The Iowa Department of Revenue oversees the collection of various state-specific taxes that businesses may have to pay, depending on their location, industry, and number of employees. Here are a few examples of these additional taxes:

  • Automobile Rental Tax
  • Cigarette and Tobacco Tax
  • Fuel Tax
  • Hotel and Motel Tax

The Iowa Department of Revenue’s Starting a Business guide has more information on the additional taxes that may affect your LLC.

Iowa Local Taxes

Local laws and ordinances differ across Iowa’s cities and counties. Regardless of where you live in the state, check with your local jurisdiction to ensure your business obtains the proper local permits and follows any local regulations that may impact its operations.

Iowa LLC Compliance

Your LLC must obey Iowa state and local laws in order to remain in good standing. While LLCs technically don’t file taxes with the state, Iowa businesses must still file a biennial report every other year.

Iowa LLC Biennial Report

All Iowa LLCs must file a biennial report every two years with the Iowa Secretary of State. You can do this by mail or online. Filing by mail costs $45 while the online filing fee is $30.

The filing deadline for your report will be between January 1 and April 1 of each odd-numbered year. If you form your LLC in June 2023, for example, your first biennial report will be due between the beginning of January and the beginning of April 2025. If you instead form your LLC in June 2024, your first biennial report will still be due by April 1, 2025.

If you fail to file this report by April 1 of each odd-numbered year, the state will place your LLC into “delinquent” status. This status puts restrictions on your business until the state approves your late filing. If you don’t file by August 8, the state will shut down your LLC. Remember to file your biennial report on time to avoid penalties or the dissolution of your business.

For more information, check out our Iowa LLC Biennial Report guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.