Iowa Code § 99B.8: Tax on prizes.

All prizes awarded pursuant to a gambling activity under this chapter are Iowa earned income and are subject to state and federal income tax laws. A person conducting a game of skill, game of chance, bingo, or a raffle shall deduct state income taxes, pursuant to section 422.16, subsection 2, from a cash prize awarded to an individual. An amount deducted from the prize for payment of a state tax shall be remitted to the department of revenue on behalf of the prize winner.