21. PENSION
/ RETIREMENT INCOME EXCLUSION.
If you or your spouse receive
a pension, an annuity, a self-employed retirement plan, deferred compensation,
IRA distribution, or other retirement plan benefits, you may be eligible
to exclude from Iowa income tax part or all of the retirement income
that is taxable on your federal return. The Roth conversion income,
included in net income, is eligible for this exclusion. Social Security
benefits are not included.
The exclusion can be up
to $6,000 for individuals who file status 1, 5, or 6 and up
to $12,000 for married taxpayers who file status 2, 3, or 4.
(If, for example, an individual has $5,000 in pension/retirement
income, the exclusion will be the actual $5,000, not the maximum
of $6,000.)
To take this exclusion you or your spouse must meet one of the following conditions:
- 55 years of age or older
on December 31, 2009, or
- disabled, or
- a surviving spouse or a
survivor having an insurable interest in an individual who would
have qualified for the exclusion in 2009 on the basis of age or disability.
A survivor other than
the surviving spouse is
considered to have an "insurable
interest" if the survivor is a son, daughter, mother, or father
of the annuitant or pensioner.
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Married Separate Filers: If
both spouses have pension income, whether both or only one
meet the eligibility requirements, the exclusion of up to
$12,000 is prorated between them in the ratio that each spouse’s
pension relates to the total pension received by both spouses.
(Examples of how to prorate) |
EXAMPLE
Spouse A has a taxable pension of $35,000.
Spouse B has a taxable pension of $15,000.
Total: 35,000+15,000 = 50,000
Spouse A's percent of total income: 35,000 divided by 50,000 = 70%
Spouse A's portion
of the exclusion: Multiply $12,000 (the maximum exclusion) by 70%
= $8,400. Spouse B’s portion is $12,000 – $8,400 = $3,600.
If only one spouse has pension income, that spouse would take the entire exclusion of up to $12,000. The spouse who has no pension income would receive no exclusion, even if that spouse is the only one who meets the eligibility requirements.
This information is based on Rule 40.47.
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