62. OUT-OF-STATE TAX CREDIT.
All income an Iowa resident earns is taxable to Iowa to the same extent that it is taxable on the federal return even if the income was earned in another state or foreign country. If another state or foreign country taxes that same income, then the Iowa resident may be able to claim a credit on this line. Use form IA 130 to compute the Out-of-State Tax Credit.
- Nonresidents of Iowa cannot claim this credit.
- Part-year residents of Iowa may claim this credit only if the income they earned during that part of the year that they were Iowa residents was also taxed by another state or country.
- The state or foreign income tax imposed on your income is the tax shown on the income tax return you filed with that state or country. It is not the amount that was withheld from your wages.
- An IA 130 form must be figured separately for each state or foreign country. Separate IA 130s are not required for foreign taxes paid by mutual funds or other regulated investment companies.
- The combined total of all credits cannot exceed the Iowa tax liability.
In order to receive the credit, a complete copy of your income tax return(s) filed with the other state(s) must be submitted with your Iowa return, along with a copy of the IA 130. If you are claiming the credit for taxes paid to a foreign country, include a copy of federal form 1116, Computation of Foreign Tax Credit if it is required with your federal return.
Special Instructions for Minimum Tax or Lump-sum Distribution Tax
If you were assessed a minimum tax or a special tax on a lump-sum distribution by another state or items similarly taxed on your Iowa return, you must separately compute an out-of-state credit for each of these items. Do not include minimum tax or a special lump-sum tax when computing the regular tax credit.
Report the amount of preference items taxed by the other state on line 1. However, a preference item may be included in line 1 only if it is also a preference item for Iowa purposes. Divide the amount on line 1 by the total amount of tax preferences taxed by Iowa. Enter this amount on line 2. Enter on line 4 the minimum tax figure from line 45, IA 1040. On line 6, report only the portion of the minimum tax liability from the other state which applies to preference items which were also taxed by Iowa.
Report on line 1 the amount of distribution subject to special lump-sum tax by the other state. Do not include distribution taxed by other state as part of gross income. Utilize the total lump-sum distribution taxed by Iowa to compute the percentage on line 3 and report on line 4 the Iowa Lump-Sum Distribution Tax from line 44, IA 1040.