Iowa employers that meet the following criteria are allowed an additional deduction on their Iowa income tax returns for hiring ex-offenders.
This deduction is 65 percent of the wages paid in the first 12 months of employment; the maximum deduction is $20,000 per employee.
This deduction is in addition to the targeted jobs tax credit.
- The employer claims the deduction on the Iowa 1040 individual income tax return under "other adjustments" or on the Iowa corporation income tax return under "other reductions."
- If 65 percent of an employee’s wages does not meet the $20,000 maximum in a single tax year, the balance may be claimed the following year to the extent the employee worked fewer than 12 months in the initial year.
- If a business employed an ex-offender prior to learning of this benefit, the employer may amend income tax returns to include the deduction. Returns can only be amended within three years from the due date of the return.
- An employer claiming the additional deduction must submit a separate sheet with the tax return with the following information: the employee’s name, address, Social Security number, date of hiring, and total wages paid.
- The qualifying employee may be any age; no age restrictions apply.
- The qualifying employee must be a new hire. A current employee who becomes an ex-offender does not qualify.
- The qualifying employee may hold more than one job; each employer may take the deduction.
- The qualifying employee does not have to be employed full time.
An ex-offender is defined as someone who...
- has been convicted of a felony in this or any other state or the District of Columbia or
- is on parole or
- is on probation for an offense other than a simple misdemeanor or
- is in a work release program or
- is still incarcerated or
- qualifies under the interstate probation and parole compact
An ex-offender must meet the following criteria to qualify for the deduction:
- The ex-offender must pass the business’ probationary period. If an employer does not have a written policy, the probationary period is six months for the purpose of this deduction.
- The ex-offender must not be hired to replace another employee who was terminated within the previous 12 months unless that employee was terminated for misconduct in connection with employment. If the employee left voluntarily, the ex-offender will qualify for the deduction.
- If the ex-offender is certified as an economically disadvantaged ex-offender for the targeted jobs tax credit, the ex-offender automatically qualifies for this deduction.