Iowa · LLC tax election
Iowa LLC: S corp or C corp?
Iowa has a corporate rate that is meant to fall every year, and so far it has not.
See Iowa at a glanceShort answer
Iowa taxes a C corporation at 5.5% on the first $100,000 and 7.1% above it for 2026, while individuals pay a flat 3.8%. An S corporation pays tax only on built-in gains and passive income. The state math leans toward S once profit passes about $100,000.
Last checked .Iowa at a glance
| Question | Iowa |
|---|---|
| S election recognized? | Yes, Iowa follows the federal election1 |
| Separate state form and deadline | No separate state form2 |
| Tax the S corp itself pays | Only on built-in gains and passive investment income, at corporate rates.3 |
| C corp rate and minimum | 5.5% to 7.1%, graduated4 |
| Entity tax on a default LLC | None for a default LLC5 |
| Personal income tax | Yes, on wages and pass-through income6 |
What is different about Iowa?
Iowa passed a law that steps the corporate rate down to a flat 5.5% as revenue allows. For 2026 the Department of Revenue ruled the trigger was not met, so rates for 2026 match 2024 and 2025: 5.5% on income up to $100,000 and 7.1% on income above that. The personal rate is a flat 3.8% in 2026. So a C corporation earning $200,000 pays a 7.1% rate on the top half, versus 3.8% on your return if S. The S corporation itself pays corporate-rate tax only on built-in gains and passive investment income. Owners should check the rate-setting notice each October; it moves the break-even.
Does Iowa recognize a federal S corp election?
Iowa recognizes S corporations as pass-throughs. You file Form IA 1120S if you do business in Iowa or have Iowa-source income, and the shareholders pay Iowa tax on their share at the flat 3.8% for 2026. The S corporation pays corporate-rate tax only on built-in gains and passive investment income, using the same 5.5% and 7.1% brackets. We did not find a separate Iowa S election form.
Does my LLC need a separate Iowa election or form?
Iowa has no separate S election form; every S corporation doing business in Iowa files Form IA 1120S, due the last day of the fourth month after year-end.2
What does Iowa tax an S corp or LLC at the entity level?
Is a Iowa LLC taxed as a C corp ever better?
Iowa taxes C corporation income at 5.5% on the first $100,000 and 7.1% on income above $100,000 for tax year 2026. The Department of Revenue's October 2025 order held the rates at their 2024 and 2025 levels. The statute aims for a flat 5.5% eventually, but it has not arrived. Dividends are then taxed again on your return.
Run your Iowa numbers
With the 7.1% rate kicking in above $100,000 and the personal rate at 3.8%, the S election starts paying off when profit grows past that range, since the same dollars face a lower rate on your return. Under $100,000 the state difference is smaller. Federal payroll savings are on top of that.
Result
How much would a Iowa LLC owner save as an S corp?
| Taxed as | At $80,000 profit | At $150,000 profit |
|---|---|---|
| Default LLC | $11,304self-employment tax $11,304 + Iowa LLC tax $0 | $21,194self-employment tax $21,194 + Iowa LLC tax $0 |
| S corp | $9,344payroll tax $7,344 + Iowa S corp tax $0 + $2,000 payroll and prep | $15,770payroll tax $13,770 + Iowa S corp tax $0 + $2,000 payroll and prep |
| C corp | $17,454payroll tax $7,344 + Iowa tax $1,760 + federal $6,350 + $2,000 payroll and prep | $30,977payroll tax $13,770 + Iowa tax $3,300 + federal $11,907 + $2,000 payroll and prep |
Assumes a 60% salary8 and a single filer. Income tax is left out. C corp dividends are taxed again. Iowa taxes an S corp only on built-in gains and passive investment income, so it is $0 here.
When is the Form 2553 deadline for a Iowa LLC, and what if I miss it?
Late relief: federal steps, deadline guide.
What to do next
How to start one, or have us form it from $123.75.
Registered agent $74.25/yr, annual report.
LLC vs S corp guide, election deadline, Form 2553 filed for $165.
More on Iowa: How to start a Iowa LLC · How to start a Iowa corporation · Iowa LLC cost · Iowa annual report · Annual report late fees by state
File the S-Corp Election for your Iowa LLC
We file Form 2553 for a flat $165.
Get the S-Corp ElectionCommon questions
What is the Iowa corporate income tax rate for 2026?
5.5% on income up to $100,000 and 7.1% on income over $100,000. The Department of Revenue certified these rates for 2026 as unchanged from 2024 and 2025.
Does Iowa recognize S corporations?
Yes. An S corporation doing business in Iowa files Form IA 1120S, and shareholders pay Iowa tax on their share. The S corporation pays only on built-in gains and passive investment income.
What is the Iowa individual income tax rate for 2026?
A flat 3.8%. Iowa law provides a single rate for all levels of taxable income.
Will Iowa's corporate rate drop to a flat 5.5%?
Under the statute, rates step down when revenue triggers are met, until the rate is 5.5% on all corporate income. For 2026 the trigger was not met, so the two-bracket structure stays.
Sources 9 links, checked Nov 6, 2026
- Iowa recognizes S corporations as pass-throughs; they file Form IA 1120S and the shareholders pay the tax. revenue.iowa.gov, checked Nov 6, 2026
- Iowa has no separate S election form; every S corporation doing business in Iowa files Form IA 1120S, due the last day of the fourth month after year-end. revenue.iowa.gov, checked Nov 6, 2026
- An Iowa S corporation pays corporate-rate tax only on built-in gains and passive investment income. revenue.iowa.gov, checked Nov 6, 2026
- For 2026 Iowa taxes C corporation income at 5.5% up to $100,000 and 7.1% above it; the scheduled drop to a flat 5.5% did not trigger. revenue.iowa.gov, checked Nov 6, 2026
- Iowa disregards an entity that is disregarded federally: the owner reports its activity on the owner's own tax return. revenue.iowa.gov, checked Nov 6, 2026
- Iowa taxes individuals at a flat 3.8% for 2026. revenue.iowa.gov, checked Nov 6, 2026
- IRS: Form 1120 instructions, C corp rate irs.gov, checked Nov 6, 2026
- IRS: S corp reasonable compensation irs.gov, checked Nov 6, 2026
- IRS: Form 2553 instructions irs.gov, checked Nov 6, 2026
Last verified Nov 6, 2026.
This page explains the rules; it is not tax advice. Run your numbers with a CPA or enrolled agent before you elect.
Last verified Nov 6, 2026.