State guide · Iowa · 2026 rules

S corporation in Iowa: what the election changes

Iowa adds little to the S-corp math. Your income is taxed at the same 3.8% rate either way, and the business pays unemployment tax on your salary.

Updated October 24, 20268 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

Iowa follows the federal S election; there is no separate state election. The S corporation files Form IA 1120S each year, due April 30 for a calendar year.

Iowa puts no tax on an S corporation’s income. The income passes to you and is taxed at Iowa’s 3.8% individual rate, the same as a sole proprietor’s or single-member LLC‘s profit.

An LLC that elects stays an LLC and keeps filing its biennial report with the Secretary of State. The election does not change that filing.

Unemployment tax on your salary

Unemployment insurance: 1.000% for a new non-construction employer on the first $20,400 of wages in 2026. Iowa Workforce Development counts a corporation’s officers as employees if they perform services. An LLC member’s salary is covered too; only payments in proportion to ownership are excluded.

The optional pass-through entity tax

Iowa’s pass-through entity tax is 3.8%. The election is made for one tax year at a time, by six months after the return’s original due date (October 30 for a calendar year), and cannot be undone. You get a refundable credit of about 96.2% of the tax paid. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	Statewide
$80,000 / $45,000	$767 lower
$120,000 / $60,000	$3,168 lower
$200,000 / $90,000	$7,948 lower

Starting payroll in Iowa

Register for a withholding permit with the Iowa Department of Revenue, and for unemployment insurance at myIowaUI within 30 days of first paying wages.

New hire paperwork for Iowa

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status