Iowa minimum wage in 2026 (and 2027)

Iowa ties its rate to the federal one

Think of Iowa's rate as a ratchet. If Congress lifted the federal minimum, Iowa's would rise with it automatically; a raise above $7.25 on Iowa's own initiative would take an act of the legislature. Today both numbers are $7.25, the federal level since July 24, 2009.

Overtime follows the federal 40-hour workweek, at $10.875 an hour for a minimum wage worker. Workers under 20 may be paid the federal $4.25 opportunity wage during their first 90 days.

The tipped wage is where Iowa costs more

Iowa caps the tip credit at 40% of the minimum, or $2.90, which leaves $4.35 an hour that must come out of the employer's pocket. The rule applies to staff who get more than $30 a month in tips. Many payroll products ship with a $2.13 tipped default, which in Iowa would shortchange each server $2.22 for every hour, so check the setting before the first run.

The arithmetic: hourly, monthly, yearly

Iowa's $7.25 over 52 forty-hour weeks totals $15,080.00, or $1,256.67 per month. At the $4.35 tipped rate, the employer's cash outlay for the same 2,080 hours is $9,048.00.

That tipped gap adds up. Against a $2.13 state, an Iowa restaurant spends an extra $2.22 x 2,080 = $4,617.60 per full-time server every year, before payroll taxes are added on top.

What an Iowa employer adds to $7.25

Iowa's 2026 unemployment wage base dropped to $20,400, from $39,500 in 2025 under SF 607, and new employers pay 1.0%. A $15,080 full-time salary sits entirely below that base:

Payroll taxes come to $1,346.42, an 8.9% markup on wages. Other states' bases and rates are in the 2026 SUTA rate table, and the employee cost calculator handles any other pay level.

Has Iowa changed its rate recently?

It has not. Each year of the DOL history tables from 2020 to 2024 shows Iowa at $7.25, and 2026 is unchanged. The states around it have moved on: Minnesota is at $11.41 and heads to $11.87 in 2027, while Nebraska and Missouri both reached $15.00 in 2026. Sioux City and Council Bluffs employers recruit against those rates, and any hours an employee works across the river are owed at the other state's rate.

Setting up Iowa payroll

Get an Iowa withholding account and an unemployment insurance account before you run payroll, file new hire reports quickly (Iowa's deadline is shorter than the federal 20 days), and enter $4.35 as the tipped cash wage. Registration links are on our Iowa payroll tax page. Gusto charges $49 monthly plus $6 for each employee on its Simple plan as of October 16, 2026; the best payroll software for small businesses shows how it scores against rivals.