Is Iowa Cheap to Live In? A Look at the Cost of Living

Iowa is often considered an affordable place to live. Understanding the various factors that contribute to daily expenses, from housing to taxation, provides a comprehensive picture for anyone evaluating the state as a potential home.

Overall Cost of Living

The Cost of Living Index (COLI) compares expenses in an area to a national average of 100. A score below 100 indicates affordability. Iowa consistently ranks below the national average, with figures between 80.1 and 89.7. This means the overall cost of living in Iowa is approximately 10.3% to 19.9% lower than the national average.

Annual expenses for an individual average around $43,542, or $3,629 per month. Families with children can expect higher yearly costs, potentially around $88,966, or $7,412 monthly. These figures reflect the state’s general affordability across various spending categories.

Key Expense Categories

Housing is a significant determinant of the overall cost of living, and Iowa offers lower prices than the national average. The median statewide rent for all property types averages $1,150 per month, well below the national average of $2,100. A one-bedroom apartment typically ranges from $720 to $966, while a two-bedroom unit costs between $914 and $1,141 monthly. The median home price in Iowa is $226,900 to $234,000, compared to the national median exceeding $430,000.

Utility expenses in Iowa are lower than national averages. The average monthly utility bill for a household ranges from $507 to $543, compared to a national average of $590-$600. Electric bills average $117 per month, and natural gas costs are approximately $10.30 per thousand cubic feet.

Grocery and food costs in Iowa are slightly below the national average. Residents spend around $227.32 weekly on food prepared at home, compared to the national average of $270.21. An individual’s monthly grocery expenses average $347. Dining out is also less expensive, with weekly spending around $81.26 compared to a national average of $109.21.

Transportation expenses in Iowa are economical, particularly regarding fuel costs. Gasoline prices average between $2.75 and $3.15 per gallon, which is lower than the national average. Major urban centers like Des Moines, Cedar Rapids, and Davenport offer public bus services, with fares around $1.75 per ride and monthly passes available for about $45.

Healthcare costs in Iowa are more affordable than in many other states. The average annual healthcare expenditure per person is approximately $6,400. For those seeking health insurance through the marketplace, benchmark plans range from $429 to $507 per month. Employees with employer-sponsored health insurance pay around $1,845 annually for coverage.

Regional Differences in Cost

While Iowa is generally affordable, the cost of living varies by location. Major urban centers have higher expenses than smaller towns and rural areas. Des Moines, Iowa City, and Council Bluffs are typically the most expensive metropolitan areas. Waterloo, Cedar Rapids, and Davenport offer more affordable living options.

Housing costs illustrate these regional differences. The median home price in Des Moines is $211,000, while in Iowa City, it is $315,000. A one-bedroom apartment in Des Moines averages $1,107, whereas in Iowa City, it is $1,275. Cedar Rapids offers a more budget-friendly alternative for renters, with one-bedroom apartments averaging $786.

Taxation and Its Impact

Iowa’s tax structure impacts residents’ financial outlays. The state’s individual income tax system is transitioning. For income earned in the 2024 tax year, Iowa uses a progressive system with rates from 4.4% to 5.7%. For the 2025 tax year, a single flat tax rate of 3.8% takes effect, reducing to 3.9% by 2026. Income tax calculations begin with federal taxable income, and the state does not have its own standard or itemized deductions.

The statewide sales tax rate in Iowa is 6%. Many municipalities and counties implement local option sales taxes, adding an additional 1% or 2% to the state rate, for a total sales tax up to 7% or 8% in some areas. This tax applies to most tangible personal property, certain digital products, and a range of services. Essential items like food and prescription drugs are exempt.

Property taxes in Iowa are levied at the local level by counties and cities, leading to significant rate variations. The effective property tax rate, the amount paid as a percentage of home value, averages 1.49% statewide. Property values are assessed every two years by local assessors. The state applies an “assessment limitation” or “rollback,” capping the aggregate taxable value of residential property statewide from increasing by more than 3% annually. Various property tax credits, such as the Homestead Credit, are available to reduce a homeowner’s tax burden.