DES MOINES — Iowa taxpayers with overdue payments will face a 9 percent annual interest rate beginning January 1, 2027, according to an updated announcement issued October 23 by the Iowa Department of Revenue.
The department listed its 2027 interest rates as 9.0 percent annually, 0.8 percent monthly and 0.024658 percent daily.
The announcement establishes the interest rates the department charges on overdue payments.
How Iowa calculates its overdue tax interest rate
According to the department, Iowa Code Section 421.7 sets the procedure for determining the annual and monthly rates.
The annual calculation begins with the average monthly bank prime rate over the preceding October-through-September period. That average is rounded to the nearest whole percentage point, and two percentage points are added.
For the 2027 calculation, the department said the prime rate averaged 6.83 percent during the preceding 12 months. Rounding that figure to 7 percent and adding two percentage points produces the 9 percent annual rate.
Why the monthly rate is 0.8 percent
The monthly rate follows a separate rounding step.
Dividing the 9 percent annual rate by 12 produces 0.75 percent. Iowa’s calculation rounds that figure to the nearest one-tenth of a percentage point, resulting in the announced monthly rate of 0.8 percent.
The department calculates the daily rate by dividing the annual rate by 365, producing the announced daily figure of 0.024658 percent.
New rates take effect January 1
The 2027 rates take effect January 1, according to the department’s updated notice.
The announcement explains that the annual calculation uses average monthly prime-rate figures published by the Federal Reserve.