You can use almost any graphics or creative printing program to design iron on transfer artwork. Ideally the program will have an option to flip or reverse the image for transfer printing or you can manually flip the image in the document. However, there are some t-shirt design software programs specifically for creating personalized t-shirt designs and similar iron on transfer craft projects. These programs are for the Mac platform.

The Print Shop for Mac 2 - MacKievThe newest version of The Print Shop for the Mac has better layout tools, more graphics and photos (19,500+), more special effects and includes thousands more projects (9500+) such as multi-page booklets. Like version 1 it integrates with your Mac apps such as iPhoto, iDVD, and iCal. Use its layout tools and graphics to design images for t-shirts and other items to print onto iron-on transfer paper.

Print Explosion 3 Mac - Image courtesy PriceGrabberPowerPC and Intel-based Mac users can create scrapbooks, greeting cards, posters, labels, calendars, and yes, iron-on transfers for t-shirts, mousepads, and other crafts with the graphics, fonts, and ready-made templates in this print creativity software. It also integrates with iTunes, iPhoto and Mac OS X Address Book.
This is actually an online t-shirt design service, not typical t-shirt design software. It walks you through the t-shirt design process online -- using their artwork or upload your own. Once you like the way the shirt looks online, place an order. You can design other items too like hats and bags.