a. Accrual method:
who had capital gains in 2008 that were reported on the installment
method for federal tax purposes and the entire gain was reported
for Iowa in a prior year do not have to report installments.
b. Alternative motor vehicle deduction:
Alternative motor vehicle deduction of $2,000 for those completing federal form 8910 (Alternative Motor Vehicle Credit)
The Internal Revenue Service certifies whether or not a vehicle qualifies.
A complete list of vehicle models that have been certified for the Alternative Motor Vehicle Credit can be seen on the IRS Web site.
c. Beneficiaries, exemption of payments to:
Installment payments and lump sum payments received
on or after July 1, 2001, by a beneficiary from an annuity of a deceased
employee, are exempt from income tax if the payments are included
in the deceased employees estate for Iowa inheritance tax purposes. If this annuity income is included as part of Iowa gross income and included in the deceased employees
estate for Iowa inheritance tax purposes, enter that amount on this
Capital gains from installment sales in 2008:
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.
e. Capital or ordinary gain from involuntary conversion related to eminent domain:
A new exclusion of both capital gain and ordinary gains is available
for individual income taxpayers relating to capital
or ordinary gain income realized by a taxpayer as a result of the
involuntary conversion of property due to eminent domain. Eminent
domain relates to the authority of certain government agencies or
instrumentalities of government to condemn private property for any
public improvement, public purpose, or other public use.
If there is no ordinary or capital gain recognized for tax purposes
because the converted property is replaced with property that is
similar to, or related in use to, the converted property, there is
no exclusion allowed for Iowa tax purposes until the remaining gain
is recognized for federal tax purposes or until the time of disposition
of the replacement property. Any exclusion allowed for Iowa tax purposes
does not alter the basis of the property as established for federal
tax purposes, so the basis will remain the same for both federal
and Iowa tax purposes.
f. Claim of Right Deduction:
income was repaid in the 2008 tax year and was reported and taxed
on a prior Iowa return, that income may be deducted on the 2008
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 2006 Iowa return.
In early 2008 the taxpayer was notified that $4,000 of the unemployment
benefits had to be repaid. The benefits were repaid by the end
of 2008. The taxpayer may claim a $4,000 income adjustment on line
24 of the 2008 Iowa return.
g. Iowa 529 Education Savings Plans:
If you, your spouse, or any other interested party
participate in College Savings Iowa 529 Plan (Iowa Educational Savings Plan Trust) or
Advisor 529 Plan, each may deduct an amount contributed
not to exceed $2,685 per beneficiary. These are Iowa Section 529
Plans. Please note: A rollover from another state's 529 plan qualifies toward the deduction for Iowa income tax.
Disability income exclusion:
may exclude from Iowa tax a portion of the disability pay
you received in 2008 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, 2008, you had not yet reached the
age when your employers 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 doctors statement must accompany each years return attesting to the taxpayers complete and permanent disability.
i. Domestic production activities deduction from line 35 of the federal 1040:
Iowa allows the deduction for qualified production
activities income set forth in Section 199 of the Internal Revenue
Code for tax periods beginning on or after January 1, 2005.
Important: Please see current
Iowa Status on Educator Expenses Deduction
Enter out-of-pocket teacher expenses as
allowed on the federal 1040. 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.
k. Employer Social Security Credit:
If your business was in the food or beverage industry
and you claimed a credit for a portion of employer Social Security
tax on employee tips, you may claim a deduction on line 24 for
l. 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.
m. Film production income exclusion (HF 892-C)
Income received by Iowa residents from qualified film expenditures relating to certain film, television or video projects is eligible for this exclusion. The film, television or video project must be registered with the film office of the Department of Economic Development and must have expenditures of at least $100,000 in Iowa
A qualified expenditure is a payment to an Iowa resident for the sale, rental or furnishing of tangible personal property or for services directly related to the registered project. The exclusion is allowed only to the extent that income is included in federal adjusted gross income.
A taxpayer who claims the film qualified expenditure tax credit is not eligible for the income tax exclusion.
n. Foreign-earned income exclusion and/or foreign housing deduction from federal form 2555 or form 2555EZ.
Gains or losses from distressed sale transactions:
If you need information, e-mail our tax specialists.
p. Health savings
account deduction from line 25 of the federal 1040
veterans program, contributions to (do not put
on IA Schedule A)
An injured veteran's grant program is available under the Iowa Department
of Veteran Affairs. Money appropriated for these grants will be given
to veterans injured in a combat zone after September 11, 2001. The
grants cannot exceed $10,000 per injured veteran. The Department
of Veteran Affairs may also receive money from any public or private
source for purposes of providing grants to injured veterans.
A deduction is allowed for the amount paid by a taxpayer
to the Department of Veteran Affairs for the purposes of providing
grants to the injured veterans grant program. Do not claim these
amounts on the Iowa Schedule A.
r. Injured veterans
program, grants from
The amount of Department
of Veteran Affairs grant money received by an injured veteran that
is included in the veteran's federal adjusted gross income is not
included in the veteran's Iowa net income.
s. 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.
Information: See this file for all military information
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 carryback provision.
v. Organ transplant
A deduction in computing Iowa adjusted gross income is not allowed for taxpayers for un-reimbursed expenses relating to a human organ transplant. The taxpayer, while living, who donates all or part of a designated human organ can claim a deduction for un-reimbursed expenses such as travel expenses, lodging expenses and lost wages.
The deduction is limited to $10,000, and a taxpayer can only claim this deduction once. If a taxpayer claims this deduction for Iowa tax purposes, the taxpayer cannot also claim these same unreimbursed expenses as an itemized deduction for medical expenses on the Iowa return.
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.
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.
Student Loan Interest Deduction:
Enter the same figure that is allowed on your federal 1040, line 33, or line 18 of federal 1040A.
Tuition and fees deduction:
Important: Please see current
Iowa Status on Tuition and Fees Deduction
the amount from the federal 1040 or federal
NOTE: This deduction can only be
taken on the Iowa return if the same deduction was taken for federal
tax purposes - if the federal Lifetime Learning or Hope credits
were taken in lieu of the deduction, no deduction is allowed on
the IA1040 even though those credits are not allowed for Iowa purposes.
aa. Victim compensation
awards (SF 70)
To the extent included in federal adjusted gross income,
the following items can be excluded from Iowa adjusted gross
income for individual income tax:
- Amounts of victim compensation awards paid under the victim compensation
program administered by the Department of Justice under
Iowa Code section 915.81
- Amounts of victim restitution payments received pursuant to Iowa
Code chapters 910 and 915
- Amounts of damages awarded by a court, and received by a taxpayer,
in a civil action filed by the victim against an offender
veterans bonus (SF 578)
A Vietnam Conflict Veterans Bonus fund is established under the
Iowa Department of Veterans Affairs.
This bonus is available for persons
who served on active duty in the United States armed forces from
July 1, 1958, through May 31, 1975.
Eligible persons may receive:
- Active duty in the
Vietnam service area during the specified period: $17.50
for each month, not to exceed $500.
- Persons who
served on active duty during the specified period but
not in the Vietnam service area: $12.50 per month, not to exceed
The maximum compensation a person
can receive under this bill must be reduced by the amount
of any Vietnam veterans bonus received by that person for service
prior to July 1, 1973. The amount of bonus received by a Vietnam
veteran that is included in the veteran's federal adjusted gross
income is not included in the veteran's Iowa net income.
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:
Work Opportunity Credit:
If you claimed a Work Opportunity Credit on your federal income tax return, enter the amount here.
Other federal adjustments:
Other federal adjustments prior
to the calculation of federal 1040 line 38 (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 before the adjustment in question.
(Examples of how to prorate)