Tax Information

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Retirees

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Your IPERS retirement benefit is subject to all applicable state and federal taxes. We will withhold taxes from your retirement benefit, per your direction.

 

Legislative Update

On March 1, 2022, Governor Reynolds signed a tax reform bill that exempts retirement income, including IPERS benefit payments, from personal income taxes. The legislation excludes from Iowa income tax retirement income for individuals who are 55 years of age or older or who are disabled and provides the same exclusion to surviving spouses or other qualifying survivors who receive retirement income due to the death of an individual who would have qualified for the exclusion. 

This tax exemption is not effective until January 1, 2023. Read the legislation here. IPERS will provide additional information as it is available.  

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IPERS benefits are partially exempt from Iowa income tax ($6,000 or $12,000 a year depending on filing status). IPERS will not withhold Iowa income tax for retirees who are not Iowa residents. IPERS must withhold Iowa income tax if you elect federal withholding, you are an Iowa resident and your benefit is more than $6,000 a year ($12,000 a year if you are married), unless you qualify for a low-income tax exemption.

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Lump-Sum Distributions

Generally, all taxable amounts paid out as a lump sum are subject to a mandatory 20% federal withholding tax if not directly rolled over to an eligible retirement plan. If you are an Iowa resident, you will be subject to 5% withholding on the taxable portion, unless you qualify for an exemption (or make a rollover). The Iowa exemption is $6,000 for individuals, and not everyone is eligible. The IPERS refund application contains further details about the Iowa exemption. (Nonresidents may request Iowa withholding from a refund.)

If a member dies and the member’s spouse receives a lump-sum death benefit, the same federal and state withholding rules apply. Other beneficiaries may be able to exempt a portion from Iowa income taxes. All IPERS applications for lump-sum distribution include IPERS’ Special Tax Notice Regarding Plan Payments. Contact the Iowa Department of Revenue at tax.iowa.gov for more information.

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Form 1099-R

Form 1099-R is used to report the distribution of retirement benefits such as pensions, annuities or other retirement plans. You should receive a copy of Form 1099-R, or some variation, if you received a distribution of $10 or more from IPERS.