Bills › 89th General Assembly
Increasing the size of an estate exempt from the state inheritance tax, and establishing a future repeal of the state inheritance tax
Topics:Taxes
Where it is now
- Done: IntroducedMarch 17, 2021
- Done: SubcommitteeMarch 18, 2021
- Stopped: House committeeDied when the General Assembly ended
- Next: Passes the House
- Next: Senate committee
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2022 session adjourned on May 24, 2022, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
This bill increases the size of an estate exempted from the state inheritance tax, and establishes a future repeal of the state inheritance tax. The bill increases the size of an estate exempt from the state inheritance tax from $25,000 to $300,000 for decedents dying on or after July 1, 2021, but before July 1, 2022, from $300,000 to $600,000, for decedents dying on or after July 1, 2022, but before July 1, 2023, and from $600,000 to $1 million, for decedents dying on or after July 1, 2023, but before July 1, 2024.
Read the full explanation
For decedents dying on or after July 1, 2024, the bill repeals the state inheritance tax. The bill repeals Code chapters 450 (inheritance tax) and 450B (qualified use inheritance tax), effective July 1, 2034, and directs the Code editor to correct references in the Code and the Iowa Acts, to those Code chapters.
House subcommittee
Named March 18, 2021. On March 29, 2021 it recommended amendment and passage. Vote Total: 3-0.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill increases the amount of an estate that is exempt from the Iowa inheritance tax and then repeals the tax entirely for deaths occurring on or after July 1, 2024. This change is estimated to reduce Iowa General Fund revenue by $2.1 million in fiscal year 2022, $9.7 million in fiscal year 2023, $23.1 million in fiscal year 2024, $59.0 million in fiscal year 2025, and $105.6 million in fiscal year 2026.2
Read the fiscal note
Description
House File 841 increases the maximum value of an estate that is exempt from the Iowa inheritance tax over three years and then repeals the inheritance tax and the qualified use inheritance tax effective for deaths occurring on or after July 1, 2024. Under current law, an inheritance from an estate with a net value of less than $25,000 is not subject to the State inheritance tax. Under the Bill, the exempt value is increased to:
- $300,000 for deaths occurring between July 1, 2021, and June 30, 2022.
- $600,000 for deaths occurring between July 1, 2022, and June 30, 2023.
- $1,000,000 for deaths occurring between July 1, 2023, and June 30, 2024. The exemption amounts under current law and under the Bill relate to the size of the decedent’s net estate (value of the entire estate after deducting liabilities and allowed estate expenses) that may benefit from the exemption. The exemption does not provide a benefit to estates with a higher net value than the exemption amount.
Background
An inheritance received by a lineal ascendant or descendant of the deceased is exempt from the Iowa inheritance tax no matter the value of the estate or the amount inherited. Tax rates from 5.0% to 15.0% may apply to inheritances that are not otherwise exempt under Iowa Code chapter 450. Inheritance tax returns are generally due nine months after the death of the decedent.
A gross total of $81.5 million in Iowa inheritance tax was deposited to the State General Fund in FY 2020. Over the past six years, refunds of Iowa inheritance tax have averaged $2.4 million. Forecasted Iowa inheritance tax gross receipts for FY 2021 and FY 2022 equal $88.0 million and $91.3 million respectively. Iowa inheritance tax refunds are not forecasted separately.
Assumptions
The Department of Revenue (DOR) analyzed a sample of 150 Iowa inheritance tax returns filed over the past five years to produce this estimate. The tax involved with the future returns is assumed to reach the State General Fund nine months after the death of the decedent.
Fiscal Impact
The DOR estimates that raising the value of an estate that is exempt from the Iowa inheritance tax and then repealing the tax beginning with deaths occurring on or after July 1, 2024, will reduce Iowa General Fund revenue by the following annual amounts:
- FY 2022 = $2.1 million
- FY 2023 = $9.7 million
- FY 2024 = $23.1 million
- FY 2025 = $59.0 million
- FY 2026 = $105.6 million
Source
- Department of Revenue
- Inheritance Tax Phase-Out · April 13, 2021