2026 tax year · cross-border wages
Crossing a state line into or out of Iowa
Iowa taxes its residents on income earned anywhere, and taxes non-residents on work done inside it. Which return you file depends on which direction you commute.
Iowa borders 6 states. They fall into 3 different situations, and which one applies decides whether you file one return or two.
Where Iowa has a reciprocity agreement
Iowa has wage reciprocity with Illinois. Work in one of these and it will not tax your wages at all: you file its exemption certificate with your employer there, which stops its withholding, and report everything to Iowa. There is no nonresident return.
| Work state | Exemption certificate | Its tax on your wages |
|---|---|---|
| Illinois | IL-W-5-NR | $0 |
Reciprocity covers wages paid by an employer. It does not cover self-employment income, so a 1099 worker in Iowa generally still sources income to where the work was done.
Where you file a nonresident return and claim a credit
Iowa has no agreement with Minnesota, Missouri, Nebraska and Wisconsin. Work in one of these and you file a nonresident return there, report the same income again to Iowa, and claim a credit for what you already paid. The credit is capped at your Iowa liability, so you are not taxed twice, the combined bill lands at roughly the higher of the two rates. On $70,000, Minnesota costs the most at $4,292 and Nebraska the least at $2,884, $1,408 between them.
| Work state | Its tax | Iowa after credit | Total | Rate that governs |
|---|---|---|---|---|
| Minnesota | $4,292 | $0 | $4,292 | Minnesota |
| Missouri | $3,190 | $0 | $3,190 | Missouri |
| Nebraska | $2,884 | $0 | $2,884 | Nebraska |
| Wisconsin | $3,323 | $0 | $3,323 | Wisconsin |
Where the work state takes nothing
South Dakota levies no personal income tax, so there is no return to file there and no credit to claim. But Iowa still taxes the wages as a resident. The catch is withholding: an employer in South Dakota has no state income tax to withhold, so nothing is taken out for Iowa either. The liability is real and nothing is being set aside against it, which usually means Iowa estimated payments.
What Iowa itself takes across a salary range
A single filer, taking the standard deduction. This is the figure every arrangement above is measured against, the tax Iowa charges a resident, whether the work happened inside the state or over a line:
| Wages | Iowa tax | Effective rate |
|---|---|---|
| $45,000 | $1,710 | 3.80% |
| $70,000 | $2,660 | 3.80% |
| $120,000 | $4,560 | 3.80% |
Coming the other way: living in a no-income-tax state, working in Iowa
South Dakota border Iowa and levy no personal income tax of their own. A resident of South Dakota who works in Iowa has the simplest arrangement on this page and the least room to improve it: Iowa taxes the wages earned inside it, $2,660 on $70,000, there is no home-state return, and so there is nothing to claim a credit against. Living across a border that charges nothing does not reduce the Iowa bill by a cent.
Reciprocity cannot help either, even where Iowa has agreements: reciprocity shifts the income to the home state's return, and a state with no income tax has no return to shift it to.
What Iowa charges as your home state
Iowa applies a single 3.8% rate to taxable income for 2026, so every extra dollar of wages is taxed at the same state rate.
State income tax on wages only, 2026 rates. Not tax advice, what this does and doesn't cover.