Bury Iowa’s Inheritance Tax

While farmland being passed among family members is a common occurrence in Iowa, the same unfairness of the inheritance tax penalizes small business owners and anyone else who leaves assets to anyone other than their lineal descendants.

 

Mary, an Iowa resident, owns 250 acres of land, worth around $2,000,000 that has been in her family for generations. She does not have any children, and her nephew, John, farms the ground. Mary dies and leaves this property to John.

The state of Iowa will send John an inheritance tax bill of around $300,000 (15%). As a young farmer, he will now have to borrow money to pay the tax and keep this land as a family farm or be forced to sell a portion of it just to pay the tax bill. This is not the outcome Iowa’s tax policy should create. If Mary had children or grandchildren and left the land to them, they would not be taxed.

Only six states in the nation levy an inheritance tax, a tax on assets given to a living person from a deceased person at the time of death. Iowa is one of them. While farmland being passed among family members is a common occurrence in Iowa, the same unfairness of the inheritance tax penalizes small business owners and anyone else who leaves assets to anyone other than their lineal descendants.

If an Iowa resident dies and their property goes to their spouse, children, grandchildren, parents, or grandparents, no inheritance tax is due.

If the property is left to a brother, sister, son-in-law, or daughter-in-law, the state will tax the property up to 10 percent of the value. If the property is left to someone else like an aunt or uncle, niece or nephew, cousin, business partner, or friend, the state will tax the property up to 15 percent of the value.

It is time for bureaucrats at the Capitol in Des Moines to completely eliminate the inheritance tax. The legislature should address this inequity in the tax code and allow Iowans to give leave their assets to whoever they want without penalty.

Already, 44 states get by without an inheritance tax. Iowa can do the same.

 

 

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