Does Iowa tax tips and overtime?

Iowa is one of only seven states whose individual income tax base begins with FEDERAL TAXABLE INCOME — IA 1040 line 2 instructs 'Enter your federal taxable income as reported on federal 1040, line 15' — and Iowa has rolling IRC conformity. Because IRC 224 is a below-the-line deduction taken before federal taxable income is computed, it flows into Iowa automatically with no legislation, and Iowa has not decoupled. The Department of Revenue states affirmatively: 'Iowa will conform with the federal tax provisions related to no tax on tips, no tax on overtime, no tax on car loan interest, and the new enhanced deduction for senior citizens.' Caveat on mechanics, not on eligibility: Iowa could not amend its W-4/withholding tables in time, so the benefit is realized at filing (larger refund / smaller balance due) rather than in paychecks.

Identical automatic mechanism: the IRC 225 qualified overtime deduction (FLSA premium only, $12,500/$25,000 joint) reduces federal taxable income, which is Iowa's literal starting number, and Iowa's rolling conformity picks it up absent affirmative decoupling. The Iowa DOR guidance names 'no tax on overtime' explicitly as a provision Iowa will conform with. Iowa did not enact a Colorado-style decoupling from the overtime deduction. Tax Foundation scores Iowa as having incorporated roughly $133.6M of OBBBA individual provisions, versus $0 for Indiana, Kansas and Kentucky.