How to Prorate
Taxpayers using filing status 3 (married filing separately on a combined return) or status 4 (married filing separate returns) may be required to prorate (divide) certain entries on the IA 1040, such as reportable Social Security benefits, federal income tax refunds, estimated federal tax payments, itemized deductions, etc.
Example 1: How spouses would prorate a federal refund:
2018 federal refund received in 2020 from a jointly-filed return: $1,000
Spouse A has net income of $15,000 on the 2019 IA 1040.
Spouse B has net income of $30,000 on the 2019 IA 1040.
Total net income: $45,000 on the 2019 IA 1040.
Divide Spouse B's net income by total income.
The result is the percent of total income earned by Spouse B.
(Spouse B's net income) $30,000 = 66.7%
(Total of both spouse's net income) $45,000
Then take $1,000 X 66.7% = $667. This is Spouse B's portion of the refund, reported on line 27 in column B.
Spouse A's portion is $1,000 - $667 = $333, which is entered on line 27 in column A.
These two amounts are entered on line 27 of the 2020 IA 1040.
Note: Round to the nearest one-tenth of a percent. For example, 66.74% becomes 66.7% and 66.75% becomes 66.8%
Example 2: How to prorate Social Security
Spouse A receives Social Security benefits of $30,000
Spouse B receives Social Security benefits of $20,000
Total benefits are $50,000
Divide Spouse A's benefits - $30,000 - by the total benefits - $50,000.
The result - 60% - is the percent of total benefits earned by Spouse A.
Complete the Iowa Social Security worksheet to determine what amount is reportable to Iowa. In this example, the total reportable Social Security benefits are $8,000. Now prorate the $8,000 between spouses.
Multiply $8,000 by 60%, which equals $4,800. This is Spouse A's portion of reportable Social Security benefits to be entered in column A of step 4.
Spouse B's portion is $8,000 - $4,800 = $3,200 which is entered in column B of step 4.
Example 3: Federal estimated tax payment proration
Spouse A has income of $75,000 that is not subject to federal withholding.
Spouse B has income of $8,000 that is not subject to federal withholding.
Their total income not subject to federal withholding is $83,000.
The estimated federal tax payments for this year totaled $18,000.
Divide Spouse A's income by the total. The result is the percent of income earned by Spouse A.
Spouse A's income not subject to federal withholding = $75,000 = 90.36% (90.4%)
[Total of both spouses' income not subject to federal withholding = $83,000]
Multiply $18,000 by 90.4% = $16,272. This is Spouse A's portion to be entered on line 32 in column A.
Spouse B's portion is $18,000 - $16,272 = $1,728, which is entered on line 32 in column B.