What's New?
Questions? E-mail Us!
2006 Expanded Instructions Home
graphic link to Iowa Department of Revenue individual income tax e-filing choices
graphic link to topic index of 2006 Iowa individual income expanded instructions
graphic link to line index of 2006 Iowa individual income tax expanded instructions

WHAT'S NEW?

 

LEGISLATIVE UPDATE

The 2006 Legislative Summary is available online only.

The phase-out of tax on Social Security benefits does not begin until January 1, 2007. Therefore, the phase-out is not calculated on the 2006 IA 1040.

The increase in filing thresholds for taxpayers 65 and older does not begin until January 1, 2007. Therefore, the change does not apply to the 2006 IA 1040.

The alternate tax calculation for taxpayers 65 or older does not begin until January 1, 2007. Therefore, it is not available on the 2006 IA 1040.

Capital gains deduction: Beginning January 1, 2006, Iowa follows Federal holding period rules. The material participation requirements have not changed.

In addition to the legislative change, the department has revised its position on another aspect of the capital gains deduction. Previously, the department had taken the position that in order to claim a capital gain exclusion for individual income tax, a taxpayer must be in a net capital gain position on the federal return. If a taxpayer was in a net capital gain position, then the capital gain exclusion could exceed the capital gains reported on the federal return if the qualifying gain was offset by non-qualifying capital losses (such as stock sales). After a review by the Attorney General's office, the department has changed its position on this issue and will allow a capital gain exclusion from qualifying gains even if the taxpayer was in a capital loss position on the federal return.

Other legislative changes are incorporated in the Line Changes information below.

LINE CHANGES

Line 2 New exempt securities

  • IA Utilities Board and Consumer Advocate Building Bonds, IA Code Sec. 422.7(45)
  • Honey Creek Premier Destination Park Bonds, IA Code Sec. 463C.12(8).

Line 24 New adjustments

  • Alternative motor vehicle deduction
  • Grants from injured veterans program
  • Contributions to injured veterans program
  • Capital or ordinary gain from involuntary conversion related to eminent domain

Congress reinstated the federal deductions for Educator Expenses and Tuition and Fees for tax year 2006.

Line 24 Adjustment name change

Alternative motor vehicle deduction of $2,000 for those completing Federal form 8910 (Alternative Motor Vehicle Credit). This had been called the hybrid/clean fuel vehicle deduction on last year's return.

Line 24 Amount of College Savings Iowa (529) Plan

  • The deductible amount for tax year 2006 cannot exceed $2,500 per beneficiary.
  • A rollover from another state's 529 plan qualifies toward the deduction for Iowa income tax.

Line 33 FICA amount

FICA payments for tax year 2006 in excess of $5,840.40 for Social Security tax for each person can be deducted as a Federal tax payment.

Line 37 Itemized Deductions

The itemized deduction for state sales and use tax paid will be allowed on the 2006 Federal and Iowa Schedule A. However, Congress reinstated this deduction after the 2006 Iowa Schedule A was printed. Please see the instructions for line 37 on how to take this deduction.

School Tuition Organization Tax Credit Contributions: Do not include as an itemized deduction any contributions for which a credit is claimed on line 54 of the IA 1040.

Injured Veterans Grant Program Contributions: These contributions do not qualify as itemized deductions.

For those itemized deduction calculations dependent upon Federal Adjusted Gross Income (AGI), the Federal AGI thresholds for tax year 2006 are $150,500 and $75,250.

Line 41 Standard Deduction for tax year 2006:

Filing Status 1: $1,650
Filing Status 3 & 4: $1,650
Filing Status 2, 5 or 6: $4,060

Line 54 New credits and form

  • School Tuition Organization Tax Credit Contributions
  • Wind Energy Production and Renewable Energy Tax Credit

New form IA 148 Tax Credits Schedule must be completed.

The Endow Iowa Tax Credit is a permanent credit.

Line 59 Checkoffs

A new Veterans Trust Fund checkoff has been added. The Keep Iowa Beautiful and Volunteer Firefighters checkoffs have been combined.

Line 65 New credit

Early Childhood Development Tax Credit: Only one of the two credits listed on this line may be taken -- Child and Dependent Care Credit OR Early Childhood Development Tax Credit. Only taxpayers with a net income of less than $45,000 are eligible to take one of these credits.

Line 66 New credits and form

  • E85 Gasoline Promotion Tax Credit
  • Biodiesel Blended Fuel Tax Credit
  • Soy-Based Transformer Fluid Tax Credit

New form IA 148 Tax Credits Schedule must be completed.

Line 74 Interest rate in 2007

10% per year; 0.8% per month;

OTHER NEWS

Due date: April 30, 2007

Military

Tax Rate Schedules

Payment Options

Power of Attorney Form

The Federal Power of Attorney form is accepted by the Iowa Department of Revenue. You must write a statement on the Federal form that indicates you are submitting it for use with State of Iowa forms. The statement needs to be initialed by the taxpayer.

Form no longer applicable or produced

IA 133A New Jobs Credit Carry Forward Schedule