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24. OTHER ADJUSTMENTS. Enter the total of other allowable adjustments as described below. Attach an explanation for each adjustment.
a. Accrual method: Taxpayers who had capital gains in 2003 that were reported on the installment method for Federal and the entire gain was reported for Iowa in 2002 do not have to report installments.
b. Beneficiaries, exemption of payments to: Installment payments and lump sum payments received on or after July 1, 2002, by a beneficiary from an annuity of a deceased employee, is exempt from income tax if the payments are included in the deceased employee’s estate for Iowa inheritance tax purposes. If this annuity income is included as part of Iowa gross income and included in the deceased employee’s estate for Iowa inheritance tax purposes, enter that amount on this line.
c. Capital gains from installment sales in 2002: The installment method for reporting capital gains for accrual accounting taxpayers is adopted for Iowa individual income tax purposes for tax years beginning on or after January 1, 2002. However, if you used the accrual method of accounting and reported the entire capital gain on the 2001 Iowa return which was reported on the installment method for Federal tax purposes, deduct the amount reported of any additional installments from that capital gain on this line.
d. Claim of Right Deduction: If income was repaid in the 2003 tax year and was reported and taxed on a prior Iowa return, that income may be deducted on the 2003 tax return. However, it may be to your advantage to take a credit on line 66. You may take either the deduction on this line or take a credit on line 66, but not both.
Example of Claim of Right Deduction: A taxpayer reported $7,000 in unemployment benefits on the 1998 Iowa return. In early 2003 the taxpayer was notified that $4,000 of the unemployment benefits had to be repaid. The benefits were repaid by the end of 2003. The taxpayer may claim a $4,000 income adjustment on line 24 of the 2003 Iowa return.
e. Disability income exclusion: You may exclude from Iowa tax a portion of the disability pay you received in 2003 if you meet ALL of the following conditions:
- You received disability pay, and
- You were not yet 65 when your tax year ended, and
- You retired on disability and were totally and permanently disabled when you retired, and
- On January 1, 2003, you had not yet reached the age when your employer’s retirement program would have required you to retire.
If you meet all of these conditions, obtain form IA 2440. You MUST complete and attach form IA 2440 to take this exclusion. A doctor’s statement must accompany each year’s return attesting to the taxpayer’s complete and permanent disability.
f. Teacher expenses: Enter out-of-pocket teacher expenses as allowed on Federal 1040, line 23. For 2002 and 2003 tax years, a deduction is allowed for up to $250 annually of expenses incurred by teachers, instructors, counselors, principals, etc., for books, supplies, computer equipment and materials used in the classroom.
g. Employer Social Security Credit: If your business was in the food or beverage industry and you claimed a refundable credit for a portion of employer Social Security tax on employee tips, you may claim a deduction on line 24 for this credit.
h. Federal Alcohol Fuel Credit: If you claimed an Alcohol Fuel Credit on your Federal tax return, enter the amount of your Alcohol Fuel Credit here and attach a copy of Federal form 6478.
i. Foreign-earned income exclusion and/or foreign housing deduction from Federal form 2555 or form 2555EZ.
j. Gains or losses from distressed sale transactions: If you need further information, e-mail our tax specialists.
k. "Hybrid" / Clean-fuel vehicles: The clean-burning fuel deduction applies to vehicles propelled by clean-burning fuel such as natural gas or electricity. Because this is an above-the-line deduction for Federal tax purposes, the deduction may be claimed on this line of the IA 1040.
The Internal Revenue Service certifies whether or not a vehicle qualifies for the deduction. In order for a vehicle to be eligible for the deduction, it must:
- be acquired by the taxpayer for original use rather than for resale,
- meet specified Federal and state emission standards,
- be manufactured for public road/highway use,
- have a minimum of four wheels, and
- not operate exclusively on rails
The deduction is $2,000 for qualifying vehicles first used in the 2003 calendar year. The deduction decreases to $1,500 for 2004, to $1,000 in 2005 and to $500 in 2006. Federal law currently provides no deduction for hybrid vehicles first used after 2006.
The Toyota Prius, Honda Insight and hybrid Honda Civic have been approved. Others may be approved in the future. Contact the Internal Revenue Service for a current list of qualifying vehicles. Call the IRS at 1-800-829-1040.
Other "clean fuel deductions" allowed on the Federal 1040, line 33, will also be allowed on the IA 1040, line 24.
l. In-home health care: To the extent included in Iowa gross income, deduct any state Supplementary Assistance payments received for unskilled in-home health-related care services to a family member.
m. Iowa Educational Savings Plan Trust: If you, your spouse, or any other interested party participate in the Iowa Educational Savings Plan Trust, each may deduct an amount contributed not to exceed $2,230 per beneficiary. This is an Iowa Section 529 Plan.
Please note: Rollover contributions from other states' 529 savings plans do not qualify for the annual deduction.n. Medical savings account deduction: If you claimed a Medical Savings Account Deduction on your Federal income tax return, enter the amount of this deduction here and attach a copy of Federal form 8853.
o. Military exemptions:
- General information: taxable to state of residence, combat zone exemptions and extensions, forgiveness of tax
- Death gratuity
- Expenses
- Loans
- Retirement plans for military, exemption of withdrawals
If a National Guard member or member of the military reserve is called to active state or Federal duty and makes a withdrawal from a qualified retirement account of the member, the amount of the withdrawal is not subject to Iowa income tax or state tax penalty. If this income is reported as taxable pension income on line 9 of the Iowa return, enter that amount here.p. Net operating loss, Iowa:
Residents: Enter any Iowa net operating loss carryforward from the prior year and attach the supporting schedule.
Nonresidents: Enter any Iowa-source net operating loss carryforward on your Schedule IA126. Nonresidents do not enter net operating losses on the IA 1040 return.
See Iowa Net Operating Loss Worksheet for additional information on the new carryback provision.
Iowa will not couple with the revised carryback provisions of the Federal Economic Stimulus Bill.
The Federal return allows for a 5-year carryback of net operating losses incurred in 2001 and 2002. Iowa has its own net operating loss provisions for a 2-year carryback, and Iowa law will not be changed based on the passage of the Federal bill. Therefore, for net operating losses incurred in 2001 and 2002, the loss carryback for Iowa purposes will remain at 2 years with exceptions noted on form IA 123.
q. Partnership income and/or S corporation income: Enter modifications that decrease the income if the income is declared on line 10 of the IA 1040.
r. Speculative shell buildings: If you are the owner of a qualifying speculative shell building, enter the difference between the depreciation taken on this building on your Federal return and the depreciation that you could take under the accelerated cost recovery system of the Internal Revenue Code if the building were classified as 15-year property. Attach a worksheet showing this calculation.
s. Student Loan Interest Deduction: Enter the same figure that is allowed on your Federal 1040, line 25, or on your Federal 1040A, line 18.
t. Tuition and fees deduction: Enter the amount from Federal 1040, line 26 or Federal 1040A, line 19.
u. Wages paid to certain individuals: If you operate a business, you may qualify for an additional deduction of 65% of the wages paid in the first 12 months up to a maximum deduction of $20,000 per qualifying new employee. This deduction is in addition to the wage deduction you were allowed on Federal Schedule C. To qualify, the new employee(s) must be disabled or an ex-offender on parole, probation, or in a work release program. All types of businesses may qualify for this deduction for hiring qualifying ex-offenders. However, the deduction for hiring qualifying persons with disabilities is restricted to certain small businesses.
Further information is available online:
v. Work Opportunity Credit: If you claimed a Work Opportunity Credit on your Federal income tax return, enter the amount here.
w. Other Federal Adjustments prior to the calculation of Federal 1040 line 34 (Federal AGI) not already taken on the IA 1040
MARRIED SEPARATE FILERS:
When the adjustment is attributable to a specific spouse, it is taken by that spouse.
When the adjustment is not attributable to any one spouse, it must be prorated based on the net income amounts on line 26. Calculate through line 26 as if the adjustment in question were excluded.
If the adjustment is attributable to a dependent, such as the tuition and fees deduction, it is prorated based on net income.