IA 126
2013 Iowa 1040 Expanded Instructions
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INSTRUCTIONS AND EXAMPLES FOR SCHEDULE IA 126
for nonresidents and part-year residents

You will need to complete the IA 1040 Long Form lines 1 – 47 before you can complete the IA 126. The IA 1040 must be completed using all-source income.

Nonresidents and part-year residents of Iowa will use the IA 126 to figure your Iowa source income. The final credit from this form is used as a credit to reduce total tax on your IA 1040.

Enter the amount of credit from line 33, IA 126, on line 48, IA 1040.

IA 126 form and instructions (pdf)

Part-year Iowa residents:

Iowa net income includes all income received while living in Iowa plus any Iowa-source income received while a nonresident.

Nonresidents:

Iowa net income will include all income from Iowa sources. Complete lines 1-26 of the IA 126 using only income from Iowa sources.

Married Separate Filers:

Divide your Iowa income between spouses using the instructions given for the corresponding line on the IA 1040 for married separate filers.

 

1. Wages, Salaries, Tips, Etc.

Part-year residents:

Include all W-2 income earned while an Iowa resident, even if it was earned in another state, and any income for services performed in Iowa while a nonresident of the state. If it was earned in another state, you may also need to fill out the IA 130 (pdf) when you pay tax to the other state. You will need to check with that state for their filing requirements.

Nonresidents:

Report only Iowa-source income. If the portion of employee compensation earned in Iowa by a nonresident is not reported separately, allocate the compensation based upon the number of days worked in Iowa to total work days.

Note to nonresident military taxpayer:

As a result of federal legislation, the nonresident military taxpayer does not include military pay on line 1 of the IA 126 (nor is it reported on the IA 1040). In general, this applies to active duty military and does not include the National Guard or reserve personnel.

Military spouses, please see this information on the Military Spouses Residency Relief Act.

2. Taxable Interest Income

Part-year residents:

Report all interest shown on the IA 1040 which accrued while an Iowa resident and any interest received while a nonresident which was derived from a trade, business, or profession carried on within Iowa.

Nonresidents:

Report only the interest derived from an Iowa trade, business, or profession.

3. Dividend Income

Part-year residents:

Report all dividends received while an Iowa resident and any dividends derived from an Iowa trade, business, or profession while a nonresident.

Nonresidents:

Report the dividends derived from an Iowa trade, business, or profession.

4. Alimony Received

Part-year residents:

Report all alimony or separate maintenance payments received while an Iowa resident.

Nonresidents:

Do not enter anything on this line.

5. Business Income or Loss

Part-year residents:

Report all federal Schedule C or C-EZ income earned while an Iowa resident and any portion of business income or loss earned while a nonresident attributable to a business conducted in Iowa.

Nonresidents:

Report the portion of business income or loss attributable to a business conducted in Iowa. Include a supporting schedule showing Iowa gross receipts divided by total gross receipts; multiply this ratio times the total net income from federal Schedule C or C-EZ. A sale is considered an Iowa sale if goods are delivered or shipped to a point within the state regardless of F.O.B. point.

6. Capital Gain or (Loss)

Part-year residents:

Include 100% of the capital gain or loss from assets sold during the time they were Iowa residents. In addition, capital gain or loss from assets sold while a nonresident of Iowa should be reported on the basis of the instructions for nonresidents that follow.

Nonresidents:

Include in Iowa income 100% of capital gain or loss from the following:

a. Sales of real or tangible personal property if the property was located in Iowa at the time of the sale; or
b. Sales of intangible personal property if the taxpayer's commercial domicile is in Iowa.

NOTE: You may have a gain here even if you have a net loss on the IA 1040.

7. Other Gains or (Losses)

Part-year residents:

Report 100% of gains or losses from assets sold or exchanged while an Iowa resident and any gains or losses from federal form 4797 while a nonresident if the property was located in Iowa at the time of sale or exchange.

Nonresidents:

Report any gains or losses from federal form 4797 if the property was located in Iowa.

NOTE: You may have a gain here even if you have a net loss on the IA 1040.

8. Taxable IRA Distributions

Part-year residents:

Report any taxable IRA distributions received while an Iowa resident.

Nonresidents:

Do not enter anything on this line.

9. Taxable Pensions and Annuities

Pension income is taxable to the state you live in when you receive it.

Part-year residents:

Report any pension and annuity income reported on line 9 of the IA 1040 which was received while an Iowa resident.

Nonresidents:

Do not enter anything on this line.

10. Rents, Royalties, Partnerships, Estates, Trusts, Etc.

Part-year residents:

Report all income shown on federal Schedule E which was earned or received while an Iowa resident and all rents and royalties from Iowa sources and partnerships or S corporation income earned or received while a nonresident.

Nonresidents:

Report all rents and royalties from Iowa sources and all Iowa partnership or S corporation income. See instructions for allocation of business income on line 5 of this section.

11. Farm Income or (Loss)

Part-year residents:

Report all net farm income earned or received while an Iowa resident. Also report all net income from Iowa farm activities while a nonresident using the instructions for nonresidents given below.

Nonresidents:

Report the total net income from the Iowa farm activities. If farm activities were conducted both within and without Iowa, provide a separate schedule showing allocation of the income and expenses to Iowa.

12. Unemployment Compensation

Part-year residents:

Report all unemployment benefits received while an Iowa resident and those benefits received the rest of the year that relate to past employment in Iowa.

Nonresidents:

Report the unemployment benefits that relate to employment in Iowa. If the unemployment benefits relate to employment in Iowa and employment in another state, report the benefits to Iowa on the basis of the Iowa salaries and wages to the total salary and wages.

13. Taxable Social Security Benefits

Part-year residents:

Report any Social Security income reported on line 13 of the IA 1040 which was received while an Iowa resident.

Nonresidents:

Do not enter anything on this line.

14. Other Income

Part-year residents:

Report any income on line 14 of IA 1040 which was received while an Iowa resident or income from Iowa sources while a nonresident. This includes gambling income and the Bonus Depreciation / Section 179 Adjustment attributable to Iowa from the IA 4562A.

Nonresidents:

Report all other taxable income from Iowa sources. This includes gambling income.

16. Payments to an IRA, Keogh, or SEP

Part-year residents:

Deduct the payments made to an IRA, Keogh, or SEP plan while an Iowa resident.

Nonresidents:

Deduct the payments made to an IRA, Keogh, or SEP plan in the ratio of Iowa earned income to total earned income.

17. Deductible Part of Self-employment Tax

Part-year residents:

Deduct the portion of the self-employment tax that is attributable to the self-employment income earned while an Iowa resident.

Nonresidents:

Deduct the portion of the amount allowed on your federal return in the ratio of your Iowa self-employment income to your total self-employment income.

18. Health Insurance Deduction

Part-year residents:

  1. Self-employed. Enter 100% of the health insurance premiums paid by a self-employed individual while an Iowa resident.
  2. Deducted through wages. Enter 100% of the health insurance premiums that were not withheld from your wages on a pretax basis while an Iowa resident.
  3. Paid direct by taxpayer. Enter 100% of the health insurance premiums that you paid while an Iowa resident.

Nonresidents:

  1. Self-employed. Enter 100% of the health insurance premiums paid by a self-employed individual by the ratio of Iowa self-employment income to total self-employment income.
  2. Deducted through wages. Enter 100% of the health insurance premiums that were not withheld from your wages on a pretax basis by the ratio of Iowa wages to total wages.
  3. Paid direct by taxpayer. Multiply the health insurance premiums that you paid by the ratio of your Iowa-source net income on line 26 of the IA 126 to total net income on line 26 of the IA 1040. For this net income calculation, do not include line 18, the health insurance deduction in the above-referenced net income amounts.

19. Penalty on Early Withdrawal of Savings

Part-year residents:

Deduct the amount of any penalty you were charged because you withdrew funds from your time savings deposit before its maturity while an Iowa resident or what was derived from an Iowa trade, business, or profession.

Nonresidents:

Deduct the amount of any penalty you were charged because you withdrew funds from your time savings deposit before its maturity that was derived from an Iowa trade, business, or profession.

20. Alimony Paid

Part-year residents:

Deduct alimony paid while an Iowa resident.

Nonresidents:

Deduct alimony paid in the ratio of Iowa gross income to total gross income.

21. Pension / Retirement Income Exclusion

Part-year residents:

If you qualify for this exclusion on the IA 1040, you may exclude the amount of taxable retirement income received while an Iowa resident, up to a maximum of $6,000 (if filing status 1, 5, or 6) or $12,000 (if filing status 2, 3, or 4).

Nonresidents:

Iowa-source retirement income received by a nonresident is not taxable to Iowa. Therefore, you do not qualify to take this exclusion. Do not enter anything on this line.

22. Moving Expenses

Part-year residents who moved into Iowa:

Part-year residents who moved into Iowa can enter any moving expenses from line 22 of the IA 1040 that relate to the move to Iowa.

Part-year residents moving out of Iowa:

Part-year residents moving out of Iowa cannot take any deduction on this line.

Nonresidents:

Do not enter anything on this line.

23. Iowa Capital Gain Deduction for certain business/farm assets/ESOP stock ONLY

Enter 100% of qualifying capital gains that are attributable to Iowa sources.

24. Other Adjustments

Deduct miscellaneous adjustments to income in the same ratio as the income to which the adjustment relates was allocated to Iowa.

26. Iowa Net Income

Subtract line 25 from line 15 and enter the difference on this line. If line 26 is $1,000 or more or you are subject to Iowa lump-sum or minimum tax, complete lines 27 through 33. If line 26 is less than $1,000 and you are not subject to Iowa lump sum or minimum tax, you are not required to file an Iowa income tax return. Married taxpayers must combine their Iowa income amounts for purposes of the $1,000 filing threshold. However, if you had Iowa tax withheld and are requesting a refund, or choose to file an Iowa return even if you aren't required to do so, put 100% on line 29, complete the remainder of the schedule, and put the credit amount on line 48 of the IA 1040.


Examples: Nonresidents of Iowa

Example 1

Chad is a resident of Nebraska and works in Iowa. His income includes wages earned in Iowa and interest income from a Nebraska bank. Chad will report the wages and interest on the IA 1040 as all-source income and then list his wages only on the IA 126 as his Iowa-source income.

Example 2

Laura lived in Illinois all of 2013 and earned $25,000 in wages from Iowa and won $5,000 on an Iowa riverboat. She will need to report all of her income on the IA 1040 as all-source income and include only the gambling income on the IA 126 as her Iowa-source income.

Iowa has a reciprocal agreement with the State of Illinois, which means that wages and salaries would be taxed to the individual's state of residence. All income received from gambling activities in Iowa is taxable to Iowa regardless of the individual's state of residence. For information on the Iowa-Illinois reciprocal agreement, click here.

Additional examples that include completed forms

Example: Part-year resident of Iowa

Example 3

Jill lived and worked in Iowa from January through June of 2013. In addition to her wages, she received interest income from an Iowa bank.

Jill then moved to Missouri and was employed there for the remainder of the year. She continued receiving interest income from the Iowa bank through all of 2013.

Jill will report all of her income from both states on the IA 1040 as all-source income. She will report only the wages and interest income earned while an Iowa resident on the IA 126 as Iowa-source income. The interest income earned from the Iowa bank during the last half of the year is not considered Iowa-source income since Jill was no longer an Iowa resident.

Additional examples that include completed forms