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Deduction

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Line: 
37
Step: 
Step 8
Step Subject: 
Taxable Income
Year: 
2018

You may itemize deductions or claim the Iowa standard deduction, whichever is larger. You may itemize deductions on your Iowa return even if you did not itemize deductions on your federal return. You must complete the Iowa Schedule A to itemize deductions on the Iowa return. Itemized deductions were eliminated or significantly changed for federal purposes, but Iowa has not conformed with many changes for 2018. A number of adjustments and separate Iowa calculations are necessary to determine the correct deduction. The new $10,000 federal cap on the itemized deduction for state and local taxes does not apply for Iowa purposes. Taxpayers may still deduct eligible state and local taxes paid, independent of the federal dollar limitation.

Standard Deduction

For tax year 2018, the standard deduction is:

Filing Status 1: $2,030

Filing Status 3 or 4: $2,030 for each spouse

Filing Status 2, 5, or 6: $5,000

Itemized Deduction

If you itemize, complete the Iowa Schedule A, check the itemized box on line 37 and enter your total itemized deduction. Include your Iowa Schedule A with your return. The federal Schedule A cannot be used with the Iowa return.

Medical and Dental Expenses

Line 1:  Enter medical and dental expenses as allowed on federal form 1040, Schedule A, line 1, less the amount reported as health insurance on line 18 of the IA 1040.  100% of the amount paid for health insurance premiums paid for with post-tax dollars is deductible on line 18 of the IA 1040. It may be to your advantage to take this deduction on line 18 of the IA 1040 instead of the Iowa Schedule A.  If health insurance premiums were used as a deduction on line 18 of the IA 1040, they cannot be used on the Iowa Schedule A.

The Iowa 1040 departs from the federal 1040 in the treatment of health insurance premiums by allowing taxpayers to elect to deduct qualifying health insurance premiums as an adjustment to Iowa gross income.  The Iowa return allows a deduction for qualifying health insurance premiums on line 18 of the IA 1040, rather than reporting those same premiums as a medical expense deduction on the Iowa Schedule A for Iowa Itemized Deductions.

If the health insurance deduction is taken on the Iowa Schedule A, then the federal tax guidance should be followed when addressing the complications due to the impact of the federal excess advance premium tax credit repayment and the net premium tax credit.

However, if the deduction is taken on line 18 of the IA 1040, then the IA 1040, rather than the Iowa Schedule A, must reflect the impact of the federal excess advance premium tax credit repayment and the net premium tax credit.  The Iowa expanded instructions for lines 14 and 18 of the IA 1040 set forth the Department’s guidance for the correct reporting of these amounts.

Line 2: Multiply federal adjusted gross income by 10% (.10).  Your federal adjusted gross income is the amount from federal form 1040, line 7, as modified by any Iowa net income nonconformity adjustments from line 14 of the IA 1040 including any depreciation/section 179 adjustments, and the moving expense deduction and domestic production activities deduction on lines 22 and 24 of the IA 1040, if any.

Enter the result, or if less than zero, enter zero.

Certain itemized deductions are allowed only to the extent that the deductions exceed a percentage of federal adjusted gross income.  For Iowa purposes, these include medical and dental expenses that exceed 10% of federal adjusted gross income, due to nonconformity. For federal purposes this percentage is 7.5% for tax year 2018.

Line 3: Subtract line 2 from line 1.  Enter the result, or if less than zero, enter zero.

Taxes You Paid

The new $10,000 ($5,000 if married filing separately) federal cap on the itemized deduction for state and local taxes calculated on federal form 1040, Schedule A, line 5e, does not apply for Iowa purposes. Taxpayers may still deduct eligible state and local taxes paid, independent of the federal dollar limitation.

Line 4: Enter other state and local income taxes (not including Iowa state income taxes) on line 4a, OR general sales taxes on line 4b, as allowed on the federal form 1040, Schedule A, line 5a.

Iowa state income tax is not deductible on the Iowa return.  The School District Surtax and the Emergency Medical Services Surtax are deductible on the Iowa return. Taxes withheld or paid to other states, or local taxing authorities are included. Note: If you received a refund in 2018 of previously deducted state and local taxes, you must add the refund back as other income, line 14 of the IA 1040.

You cannot deduct Social Security, Medicare, federal unemployment (FUTA), or railroad retirement (RRTA) taxes. You cannot deduct taxes you paid for someone else.

General sales taxes paid are available as an itemized deduction for 2018 on the Iowa Schedule A, only if you itemized at the federal level and elected to deduct general sales taxes on your federal return.

Line 5: Enter real estate taxes as allowed on federal form 1040, Schedule A, line 5b.

Line 6: Enter personal property taxes as allowed on federal form 1040, Schedule A, line 5c.

Vehicle Registration Fee Deduction and Worksheet

If you itemize deductions, a portion of the automobile or multipurpose vehicle annual registration fee you paid in 2018 may be deducted as personal property tax on your Iowa Schedule A, line 6, and federal form 1040, Schedule A, line 5c.

This deduction includes annual registration fees paid based on the value of qualifying automobiles and multipurpose vehicles.  Multipurpose vehicles are defined as motor vehicles designed to carry not more than 10 people, and constructed either on a truck chassis or with special features for occasional off-road operation [Iowa Code section 321.1(44)].

Annual registration fees on the following vehicles are not deductible: pickups (model year 2009 or older), motor trucks, work vans, ambulances, hearses, non-passenger-carrying vans, campers, motorcycles, or motor bikes.

This deduction applies only to the annual vehicle registration fee.   It does not apply to the 5% one-time registration fee/fee for new registration that is imposed on the initial registration of a vehicle.  That 5% fee is only deductible on the IA 1040, Schedule A, line 4b if the taxpayer claimed an itemized deduction for general sales taxes paid on the federal form 1040, Schedule A, line 5a.

Newer Vehicles:

Use the following worksheet to calculate the deductible amount of annual registration fees paid in 2018 for qualifying automobiles and multipurpose vehicles (model year 2008 or newer).  For tax years 2008 and earlier, pickup truck registration fees could not be taken as an itemized deduction, because the fees were structured as a flat fee and were not based on value. However, beginning with the 2009 tax year, there was a change in the registration fee structure for pickups.

More specifically, only model year 2010 and newer trucks that weigh in at 10,000 pounds or less when empty are registered based on weight, list price, and model year.  All other trucks are still subject to a registration fee based on weight. Consequently, certain 2010 model year and newer trucks may use the Vehicle Registration Deduction Worksheet.  

1. Enter the actual annual registration fee paid.

1.

2. Take the weight of your automobile and divide it by 250. The weight is found on your automobile registration certificate.

2.

3. Subtract line 2 from line 1. This is the deductible amount for line 37.

3.

Example

Malia purchased an automobile from Jennifer.

The actual fee Malia paid to register the automobile at the courthouse was $150.

The weight of the automobile is 3,000 pounds.

The deductible amount is calculated as follows:

1. Enter the actual annual registration fee paid.

1.

150

2. Take the weight of your automobile and divide it by 250. The weight is found on your automobile registration certificate.

2.

12

3. Subtract line 2 from line 1. This is the deductible amount.

3.

138

Older Vehicles:

For qualifying automobiles and multipurpose vehicles (model year 2007 or older) the deductible amount is 60% of the annual registration fees paid in 2018.

Line 7: Enter other taxes as allowed on federal form 1040, Schedule A.  Other taxes you paid are taxes not included on lines 5 or 6. List the tax paid and the total amount.

Line 8: Add lines 4 to 7.  Enter the total here.

Interest You Paid

The mortgage insurance premium deduction is not an allowable itemized deduction for Iowa tax purposes.

Lines 9a and 9b: Enter the home mortgage interest and points as allowed on federal form 1040, Schedule A with the following adjustments:  

The provisions of Internal Revenue Code section 163(h)(3)(F) which reduce the limit on qualifying home acquisition indebtedness incurred after December 15, 2017,  from $1,000,000 to $750,000 (or from $500,000 to $375,000 for married filing separately) do not apply for Iowa tax purposes. Iowa taxpayers may generally deduct interest on the first $1,000,000 ($500,000 if married filing separately) of mortgage debt that qualifies as acquisition indebtedness for qualified homes , even if such debt was incurred after December 15, 2017.  

The provisions of Internal Revenue Code section 163(h)(3)(F) which suspend the deduction of interest on home equity indebtedness do not apply for Iowa tax purposes.  Iowa taxpayers may generally deduct interest on the first $100,000 ($50,000 if married filing separately) of mortgage debt that qualifies as home equity indebtedness for qualified homes for tax year 2018.

See 2017 IRS Pub. 936 for more information on qualified homes, home acquisition indebtedness, and home equity indebtedness, for special rules related to mortgaged incurred before October 14, 1987, and for information on calculating your 2018 mortgage interest deduction for Iowa tax purposes.

Taxpayers with the mortgage interest credit can claim a deduction on line 9 of Iowa Schedule A for all qualifying mortgage interest paid in the tax year and not just the mortgage interest that was deducted on the federal form 1040, Schedule A.

Line 10: Enter points not reported on federal form 1098 as allowed on federal form 1040, Schedule A

Line 11: Reserved for Future Use. The mortgage insurance premium deduction is not an allowable itemized deduction for Iowa tax purposes.

Line 12: Enter investment interest as allowed on federal form 1040, Schedule A.  Include federal form 4952 if required.

Line 13: Add lines 9a to 12.  Enter the total here

Gifts to Charity

The following are exceptions to federal form 1040, Schedule A treatment of charitable contributions:

  • Any charitable contributions of food inventory deducted on the federal return must be added back for Iowa purposes.

  • A deduction for qualifying conservation contributions is limited to 30% of a taxpayer’s federal AGI for Iowa purposes.  For more information, see our https://tax.iowa.gov/impact-non-conformity-2016-IRC page.

  • Injured veterans grant program contributions do not qualify as itemized deductions, but can be taken on line 24 of the IA 1040.

  • Certain donations to a non-profit entity for use in the entity’s College Savings Iowa Account (529 Plan) may not qualify as an itemized deduction.  Do not include as an itemized deduction any amount that you contributed to a non-profit entity to be deposited into the entity’s College Savings Iowa Account (529 Plan) if you designated that any part of your contribution was to be used for the direct benefit of your dependent or any other specific person.

  • Iowa has not conformed to the federal repeal of the charitable contribution deduction for 80% of a donation made to an institution of higher education in return for which the taxpayer directly or indirectly receives the right to purchase tickets to athletic events.  Iowa taxpayers may deduct 80% of a qualifying contribution to the extent it doesn’t exceed the taxpayer’s contribution limitation.

  • If a taxpayer’s federal itemized deduction for a charitable contribution to a state or local government is reduced because such contribution is made in return for a state or local tax credit, the same reduction applies for Iowa tax purposes, but note the following special rules related to Iowa tax credits:

    • School Tuition Organization Tax Credit Contributions, Charitable Conservation Contribution Tax Credit Contributions, Endow Iowa Tax Credit Contributions, and Farm to Food Donation Tax Credit Contributions: do not include as an Iowa itemized deduction any contributions for which a credit is claimed on line 52 of the IA 1040.

  • Iowa has not conformed to the federal temporary suspension of deduction limitations for qualifying charitable contributions to California wildfire disaster relief efforts. Regular charitable contribution deduction limitations apply to these contributions for Iowa purposes.

  • Iowa has not conformed to the federal increase in the deduction limitation for cash contributions to certain public charities from 50% to 60% of the taxpayer’s federal adjusted gross income  for the taxable year. To the extent the federal deduction for such contributions exceeded 50% of the taxpayer’s federal adjusted gross income for the year, recalculate the deduction to apply the 50% limitation for Iowa purposes.   

Line 14: Enter the contributions by cash or check as allowed on federal form 1040,Schedule A, with the adjustments noted above.

Line 15: Enter contributions other than by cash or check as allowed on federal form 1040, Schedule A, with the adjustments noted above.  Include federal form 8283 if more than $500.

Line 16: Enter contributions carryover from prior year as allowed on federal form 1040, Schedule A, with the adjustments noted above.

Contributions carryover from prior year may be deducted if your contributions were capped in a prior year.  Iowa follows the federal guidelines for carryforwards. Documentation of the carry forward amount may be requested by the Department.

The federal adjusted gross income used to determine contribution limitations for Iowa tax purposes is the amount from federal form 1040, line 7, as modified by any Iowa net income nonconformity adjustments from line 14 of the IA 1040 including any depreciation/section 179 adjustments, and the moving expense deduction and domestic production activities deduction on lines 22 and 24 of the IA 1040, if any.

Line 17: Add lines 14 to 16.  Enter the total here.

Casualty/Theft Loss

Line 18: Enter casualty or theft loss(es) as calculated on IA 4684 worksheet.

Job Expenses and Miscellaneous Deductions

Iowa has not conformed to the federal repeal of miscellaneous itemized deductions subject to the 2% adjusted gross income floor. These deductions are generally still allowed for Iowa purposes for 2018. See 2017 IRS Publication 529 for more information about allowable deductions.

 

Line 19: Enter unreimbursed employee expenses as calculated on the IA 2106 worksheet.

The Department may request you provide a letter from your employer stating the reimbursement policy and what is reasonable and required for the position.  

Line 20: Enter tax preparation fees you paid for preparation of your tax return including fees paid for filing your return electronically.

Line 21: Enter other expenses as allowed on federal Schedule A.  List the type and amount.

Line 22: Add lines 19 to 21.  Enter the total here.

Line 23: Multiply federal adjusted gross income by 2% (.02).  The federal adjusted gross income used to determine these deductions is the amount from federal form 1040, line 7, as modified by any Iowa net income nonconformity adjustments from line 14 of the IA 1040 including any depreciation/section 179 adjustments, and the moving expense deduction and domestic production activities deduction on lines 22 and 24 of the IA 1040, if any.

Enter the result, or if less than zero, enter zero.

Line 24: Subtract line 23 from line 22.  Enter the result, or if less than zero, enter zero.

Other Miscellaneous Deductions

Line 25: Enter other miscellaneous deductions not subject to the 2% AGI floor. See 2017 IRS Publication 529 for more information about allowable deductions. List the type and amount.

Gambling losses: Gambling losses are deductible only to the extent of gambling winnings reported on IA 1040, line 13.  The gambling loss amount entered on this line shall only include losses from wagering transactions, and does not extend to business expenses incurred in the trade or business of gambling.

Total Itemized Deductions

Line 26: Is the amount on federal form 1040, line 7, as adjusted for Iowa purposes, more than $160,000?

If no, add lines 3, 8, 13, 17, 18, 24, and 25. Enter the total here............................................................................ 26._______________

 

If yes, see Iowa Itemized Deductions Worksheet, IA 104 to determine if your itemized deductions may be limited.

Iowa has not conformed to the federal repeal of the overall limitation on itemized deductions for high income taxpayers. These taxpayers may have to limit their itemized deductions.  High income taxpayers use the IA 104 Iowa Itemized Deductions Worksheet if your federal adjusted gross income exceeds $160,000. The federal adjusted gross income used to determine this limitation is the amount from federal form 1040, line 7, as modified by any Iowa net income nonconformity adjustments from line 14 of the IA 1040 including any depreciation/section 179 adjustments, and the moving expense deduction and domestic production activities deduction on lines 22 and 24 of the IA 1040, if any.

Line 27: Enter the total of all other deductions on line 27 of the Iowa Schedule A as described below:

a.    Expenses Incurred for Care of a Disabled Relative

Expenses, not to exceed $5,000, incurred in caring for a disabled relative in your home may be deducted.

Disabled Relative Qualifications:

The expenses which may be claimed are those for the care of a person who is your grandchild, child, parent, or grandparent.

The disabled person must be unable, by reason of physical or mental disability, to live independently and must be receiving or be eligible to receive medical assistance benefits under Title XIX of the U.S. Social Security Act.

A statement from a qualified physician certifying that the person with the disability is unable to live independently must be submitted with the return the first year a deduction is taken and every third year thereafter.

Qualifying Items:

Qualifying items are those that are not reimbursed.  Items may include food, clothing, medical expenses not otherwise deductible, and transportation for medical reasons.  See IRS guidelines for medical mileage rate.

An itemized schedule of expenses must be included with the return.

Non-Qualifying Items:

Expenses not directly attributable to the care of the relative, such as rent, mortgage payments, interest, utilities, house insurance, and taxes cannot be included.  

Married Separate Filers: The total deduction claimed by both spouses for each relative with a disability may not exceed $5,000.

b. Adoption Expenses

You may be eligible to deduct a portion of the adoption expenses you paid in 2018 if you incurred adoption expenses during the tax year, even if the child is not placed in Iowa.

Expenses include medical costs relating to the child's birth, any necessary fees, and all other costs connected with the adoption procedure.  Include a separate schedule listing the adoption expenses.

This deduction is taken in the year that the expenses are paid even if the child is not placed in your home during that year or if the adoption does not occur.

For tax years beginning on or after 1/1/14, there is also an Adoption Tax Credit for certain unreimbursed adoption expenses that can be calculated on the IA 177 and taken on line 62 of the IA 1040 for a child placed in Iowa. Qualifying adoption expenses exceeding 3% of total Iowa net income, less any Adoption Tax Credit claimed, are eligible for deduction. Subtract 3% of your total Iowa net income (and your spouse’s, if married) entered on line 26 from the total of qualifying adoption expense, less any Adoption Tax Credit claimed on IA 1040 Line 62. Enter the result on IA 1040 Schedule A, Line 27.

Example:  Taxpayer has Iowa net income of $100,000 and adoption expenses of $10,000. The taxpayer is eligible for an Adoption Tax Credit on line 62 of $5,000.

        $100,000 (net income) x 3% = $3,000 (expenses not eligible for deduction)

        $10,000 (total adoption expenses) - $5,000 (credit amount) = $5,000 (expenses remaining for possible deduction)

           $5,000 (expenses remaining for possible deduction) - $3,000 (expenses not eligible for deduction) = $2,000 (deduction allowed on line 27 of IA Sch. A)

c. Mileage Deduction Charitable Purposes

Iowa allows an additional deduction for automobile mileage driven for charitable organizations. Calculate the deduction as follows:

    1. Number of miles x 39¢ / mile

    2. Less charitable mileage deduction already claimed on the Iowa Schedule A

    3. Equals additional mileage deduction for charitable purposes

This information is based on 422.9(2)(d) and 8A.363.

Line 28: Add lines 26 and 27.  Enter the total here.

Proration of Deductions Between Spouses

Complete lines 29 to 33 only if you are using filing status 3 or 4.

Married Separate Filers:

If one spouse uses the itemized deduction, then both spouses must use the itemized deduction, even if separate Iowa returns are filed.

Itemized deductions must be divided between spouses in the ratio of their respective net incomes.

(Examples of how to prorate)

Line 29: Enter net income of both spouses from IA 1040, line 26.

              29a. Your net income from IA 1040, line 26

              29b. Spouse’s net income from IA 1040, line 26

Line 30: Add 29a and 29b.  Enter the total here.

Line 31: Divide the amount on line 29a by the amount on line 30.  Enter the result here to the nearest tenth of a percent.

Line 32: Multiply line 28 by the percentage on line 31.  Enter the result here and on IA 1040, line 37, column A.

Line 33: Subtract line 32 from line 28.  Enter the result here and on IA 1040, line 37, column B.  If you are using filing status 4, enter this amount on line 37, column A or your spouse’s return.

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