When people think about estate planning, taxes are often one of the first concerns. The good news is that for most individuals in Iowa, estate taxes are far less of an issue than many expect. That said, there are still a few important rules, both federal and state, to understand.
Estate Tax vs. Inheritance Tax: What’s the Difference?
The terms “estate tax” and “inheritance tax” are often used interchangeably, but they are not the same. An estate tax is based on the total value of a person’s assets at death. It is calculated at the estate level before assets are distributed to beneficiaries. In other words, it does not depend on who receives the assets—it’s based on the size of the estate itself. An inheritance tax, on the other hand, is imposed on the person receiving the assets. The amount (if any) depends on the beneficiary’s relationship to the deceased and, in some states, the size of the inheritance.
Federal Estate Tax
There is a federal estate tax, but it only applies to larger estates. As of 2026, the federal estate and gift tax exemption is $15 million per individual. For married couples, that amount can effectively be $30 million with proper planning and a timely portability election.
It is important to note that the federal exemption is a combined lifetime and death exemption. This means that taxable gifts made during your lifetime that use a portion of your federal exemption reduce the amount of exemption available to shelter your estate at death. For example, if an individual made $2 million in taxable lifetime gifts that used the federal exemption, the individual would generally have approximately $13 million of exemption remaining to apply against the estate at death, assuming a $15 million exemption and no inflation adjustments. Smaller lifetime gifts, however, may not reduce the exemption if they qualify for the annual gift tax exclusion, which is currently $19,000 per recipient, per year, or another applicable exclusion or deduction.
Because of the size of the current exemption, the vast majority of estates will not owe federal estate tax. If an estate exceeds the available exemption amount, the portion above that threshold may be subject to federal estate tax. For higher-net-worth individuals, planning strategies can help manage or reduce that exposure. There is no federal inheritance tax.
Iowa Estate and Inheritance Taxes
Iowa does not have an estate tax. Iowa also no longer has an inheritance tax. As of January 1, 2025, the Iowa inheritance tax has been fully repealed.
Other Taxes to Be Aware Of
Even if estate or inheritance taxes are not an issue, there are still a few tax considerations that may apply after death.
When Tax Planning Becomes More Important
While most people are not affected by estate taxes, planning becomes more important if you have a higher net worth, own a business or significant real estate, have large retirement accounts, or plan to leave assets in trust. In these situations, coordinating your estate plan with tax planning strategies can make a meaningful difference.
Final Thought: Focus on the Big Picture
Taxes are just one part of estate planning—and for most people, they’re not the primary issue. The real focus should be making sure your assets go to the right people and keeping things simple for your family. A well-designed plan can accomplish all of those goals while also addressing any tax considerations along the way. If you have questions about how taxes may impact your estate, I’m always happy to help you walk through your situation.
If you have questions about your situation or would like to put a plan in place, we are happy to help. You can reach us at info@sailerlegalservices.com or (319) 205-3845 to schedule a consultation.
This article is for informational purposes only and is not intended as legal advice. Reading this content does not create an attorney-client relationship with Sailer Legal Services, PLLC. Every situation is different, and you should consult with an attorney regarding your specific circumstances before making any legal decisions.