Active-duty pay
Fully Exempt
Active-duty pay fully exempt as of 2023 retirement-income-exclusion reform.
State Guide · IA
Iowa — Military Tax Treatment
Iowa cleaned up its military pay tax treatment in 2023 — Guard included. Active duty, retirement, and Guard drill pay for federally-recognized service are broadly exempt.
Tax treatment at a glance
Guard & Reserve drill pay
Fully Exempt
Iowa's 2023 military pay reform broadly exempts Guard and Reserve pay for federally-recognized service. Verify with Iowa DoR for state-only activations.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt.
The numbers · verified for tax year 2025
Top marginal rate
3.8%
Retirement-pay exemption
Full
Military retirement pay (armed forces, reserves, or National Guard) is fully exempt from Iowa income tax — no cap, no age threshold.
Standard deduction
Iowa moved to a 3.8% flat tax effective 2025 (SF 2442) and no longer has its own standard deduction — it uses the federal standard/itemized deduction from your federal return.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Iowa included.
Survivor Benefit Plan (SBP)
Follows retirement
Iowa exempts military retirement — SBP annuities are generally exempt under the same provision.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Iowa, Iowa cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Iowa can keep Texas as their tax domicile and avoid Iowa state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Iowa exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01IA Schedule IA 1040 Iowa Military Pay Exclusion — apply for both active duty and Guard pay
- 02State-only Guard activations may have different treatment — verify with Iowa DoR
Veteran-specific tax benefits
Disabled veteran property tax credit.
Official authority
https://tax.iowa.gov/ ↗State tax law changes annually. Verify current rules with the Iowa Department of Revenue before making any tax decision.
Iowa military tax — common questions
Does Iowa tax military retirement pay in 2026?
Iowa fully exempts military retirement pay. Military retirement pay fully exempt.
Does Iowa tax active-duty military pay?
Iowa fully exempts active-duty military pay for state residents. Active-duty pay fully exempt as of 2023 retirement-income-exclusion reform. Under the SCRA, Iowa can only tax the military pay of service members who are legally domiciled in Iowa — not those merely stationed there.
Does Iowa tax National Guard and Reserve drill pay?
Iowa fully exempts Guard and Reserve drill pay. Iowa's 2023 military pay reform broadly exempts Guard and Reserve pay for federally-recognized service. Verify with Iowa DoR for state-only activations.
Is VA disability compensation taxed in Iowa?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Iowa — taxes it as income.
If I'm stationed in Iowa but claim another state, can Iowa tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Iowa cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides