Income Tax Benefit for Iowa Employers Who Hire Persons With Disabilities

Iowa employers who are small businesses meeting specific criteria are allowed an additional deduction on their Iowa income tax returns for hiring persons with disabilities.

See Department Rules and Regulations 40.21

Benefit for Hiring Persons with Disabilities

Person with Disability is Someone Who:

*impairment includes, but is not limited to, physiological disorders and conditions, cosmetic disfigurement, anatomical loss, and any mental or psychological disorder.

Qualifying Person with Disability 

Must be a Small Business to Qualify

Only employers who meet the "small business" definition can claim the deduction for employing persons with disabilities.

To be considered a small business, the employer must have both of the following:

Qualifying Businesses

A qualifying business can be for profit or nonprofit and can include the following:

Non-Qualifying Businesses

Claiming the Deduction

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."

The employer 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.

Claiming the Maximum Amount

If 65% of the employee’s wages does not meet the $20,000 maximum in a single tax year, the balance may be claimed the following year as long as the employee worked fewer than 12 months.

Amending Returns

If a business employed a person with a disability before learning about this benefit, the employer may amend income tax returns to include the deduction. Returns can be amended within three years from the due date of the return.

 

(01/11/11)