Is military retirement taxed in Iowa?

How it works in Iowa

The 2025 IA 1040 begins with federal taxable income on line 2, and Schedule 1 on page 5 adjusts it. Enter the military retired pay included in federal taxable income on Schedule 1, line 4, Military retirement income, in column B, the subtractions column. Schedule 1 line 21 nets every modification and carries to IA 1040, line 3, so the pension never reaches Iowa taxable income on line 4.

Subsection 20 says the military exclusion is in addition to the general retirement exclusion in subsection 19. Since tax year 2023, subsection 19 removes pensions, annuities, IRA and 401(k) distributions for a recipient who is 55 or older, disabled, or a qualifying survivor, on Schedule 1 line 7. A 58-year-old with a DFAS check and IRA withdrawals therefore excludes both. A 45-year-old with the same income excludes only the military pay, and the IRA money stays taxable until 55.

Worked example with an assumed $27,600 pension: line 4 saves up to about $1,049 a year at Iowa's flat 3.8% rate, the rate the 2025 instructions show for line 5 and the Department's October 21, 2025 announcement keeps for 2026. The Department's retirement guidance says plan administrators withhold Iowa tax at 3.8 percent from payees who do not qualify for an exclusion, so check that DFAS is not withholding Iowa tax you will only get back by filing.

The Military Tax Information page says military retirement pay, unlike other pension income, is left out of both the filing threshold test and the alternate tax calculation. The 2025 thresholds are $9,000 for a single filer under 65 and $24,000 at 65 or older, or $13,500 and $32,000 for joint, head of household and qualifying surviving spouse filers. A retiree living on the pension alone may owe no return unless Iowa tax was withheld and a refund is wanted.

To recover Iowa tax paid on retired pay in an open year, amend within roughly three years of that return's original due date. For tax years 2023 and later, mark the return Amended and attach the IA 102 Amended Return Schedule; for earlier years, file that year's IA 1040 with the word Amended written at the top and include an explanation.

What trips Iowa retirees up

• One paragraph of the Department's Military Tax Information page is out of date. It still pairs the military exclusion with a general $6,000/$12,000 pension exclusion at 55 and shows a 65-year-old excluding $32,000 of $45,000. Since tax year 2023, subsection 19 has no dollar cap for a qualifying recipient, so that retiree, with $20,000 of military pay and a $25,000 private pension, now excludes all $45,000.
• The same page cites Iowa Code sections 422.7(31A) and (31B), the numbering from 2014. In the 2026 Iowa Code the military retirement and survivor exclusions are subsections 20 and 21 of section 422.7.
• Subsection 20 names retirement pay for service in the armed forces, the armed forces military reserve, or the National Guard. It does not name the NOAA Corps or the Public Health Service, and the Department's pages do not address them (read October 10, 2026); a pension from either still falls under the governmental pension wording of subsection 19 once the retiree turns 55.