Currently, for Iowa residents, there is an inheritance tax that only certain recipients pay when an Iowa resident dies. Here are a few key points:
The tax is based on the deceased, not the living. Thus, if the beneficiary lives in Texas but the deceased individual lives in Iowa, Iowa law applies.
The tax is based on the relationship to the deceased. If the recipient is a lineal descendant, ascendant, spouse or charity, there is no inheritance tax. Regardless of the amount. But others would be subject to a tax. Siblings are taxed at a different rate than friends, for example.
Currently, however, there is a bill pending in the 2019 Iowa legislature to repeal, in full, the Iowa inheritance tax. While that does come at a $90 million dollar cost to the state, that does remove a frustrating tax for many individuals that choose to leave assets to in-laws, friends, cousins, nephews/nieces, attorneys…