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qctimes Monday November 13, 2017
MARK-TO-MARKET: Iowa announces 2018 tax revisions
The Iowa Department of Revenue recently announced three tax revisions, effective for the January 1 through December 31, 2018 calendar tax year. Along with the revised interest rate it will charge taxpayers on delinquent taxes and make payable to taxpayers on their overdue refunds, the IDR also released the 2018 tax brackets and standard deduction amounts. The annual interest rate for 2018 will be increased to 6 percent with a monthly rate of 0.5 percent. This is the first change to the interest rate since 2010, where the rate has held at 5 percent. The interest rate used by the IDR is based on the U.S. prime rate, which closely correlates to the fed funds rate set by the Federal Reserve. The fed funds rate is the rate at which banks borrow and lend money to each other. It serves as the benchmark for which short-term credit is often based on, such as credit cards, lines of credit and short-term personal and business loans. As a general rule, the prime rate is equal to the fed funds rate plus 3 percent. The IDR uses the average prime rate from the preceding 12 months, which was 3.91 percent. It then adds 2 percent, rounded to the nearest whole percent. Thus, the IDRís new interest rate will be 6 percent. So, what exactly is driving the increase in the IDRís interest rate? In response to the 2007-2009 recession, the Fed dropped the fed funds rate to near zero. The goal was to stimulate spending to help boost a then-flailing U.S. economy. However, the economy has since returned to - Read more