Over the last century, land use and land cover (LULC) in the United States Corn Belt region shifted from mixed perennial and annual cropping systems to primarily annual crops. Historical LULC change impacted the annual water balance in many Midwestern basins by decreasing annual evapotranspiration (ET) and increasing streamflow and base flow. Recent expansion of the biofuel industry may lead to future LULC changes from increasing corn acreage and potential conversion of the industry to cellulosic bioenergy crops of warm or cool season grasses. In this paper, the Soil and Water Assessment Tool (SWAT) model was used to evaluate potential impacts from future LULC change on the annual and seasonal water balance of the Raccoon River watershed in west‐central Iowa. Three primary scenarios for LULC change and three scenario variants were evaluated, including an expansion of corn acreage in the watershed and two scenarios involving expansion of land using warm season and cool season grasses for ethanol biofuel. Modeling results were consistent with historical observations. Increased corn production will decrease annual ET and increase water yield and losses of nitrate, phosphorus, and sediment, whereas increasing perennialization will increase ET and decrease water yield and loss of nonpoint source pollutants. However, widespread tile drainage that exists today may limit the extent to which a mixed perennial‐annual land cover would ever resemble pre‐1940s hydrologic conditions. Study results indicate that future LULC change will affect the water balance of the watershed, with consequences largely dependent on the future LULC trajectory.