Other Adjustments

Line
24
Step
6
Step Subject
Adjustments to Income
Instruction Year
2020

Enter the total of other allowable adjustments as described below. Include an explanation for each adjustment.

Do not include any deduction for the small business health insurance tax credit that was not allowed as a deduction on the federal return.

a. Accrual method

Taxpayers who had capital gains in 2020 that were reported on the installment method for federal tax purposes and the entire gain was reported for Iowa in a prior year do not have to report installments.

b. Active duty military pay

Members of the armed forces, armed forces military reserve, and the national guard in an active duty status can exclude pay received from the federal government for military service performed, to the extent it was included in line 15, Gross Income.

c. Alternative motor vehicle deduction

Alternative motor vehicle deduction of $2,000 for taxpayers who are eligible for the federal Alternative Motor Vehicle Credit under Internal Revenue Code 30B and who complete federal form 8910.

d. Capital gain from installment sales reported on the 2001 Iowa return using the accrual method

The installment method for reporting capital gain for accrual accounting taxpayers is adopted for Iowa individual income tax purposes for tax years beginning on or after January 1, 2002. However, if you used the accrual method of accounting and reported the entire capital gain on the 2001 Iowa return which was reported on the installment method for federal tax purposes, deduct the amount reported of any additional installments from that capital gain on this line.

e. Capital or ordinary gain from involuntary conversion related to eminent domain

An exclusion of both capital gain and ordinary gain is available for individual income taxpayers relating to capital or ordinary gain income realized by a taxpayer as a result of the involuntary conversion of property due to eminent domain. Eminent domain relates to the authority of certain government agencies or instrumentalities of government to condemn private property for any public improvement, public purpose, or other public use.

If there is no ordinary or capital gain recognized for tax purposes because the converted property is replaced with property that is similar to, or related in use to, the converted property, there is no exclusion allowed for Iowa tax purposes until the remaining gain is recognized for federal tax purposes or until the time of disposition of the replacement property. Any exclusion allowed for Iowa tax purposes does not alter the basis of the property as established for federal tax purposes, so the basis will remain the same for both federal and Iowa tax purposes.

f. Claim of Right Deduction

If income was repaid in the 2020 tax year and was reported and taxed on a prior Iowa return, that income may be deducted on the 2020 tax return. However, it may be to your advantage to take a credit on line 62. You may take either the deduction on line 24 or take a credit on line 62, but not both.

Example of Claim of Right Deduction: A taxpayer reported $7,000 in unemployment benefits on the 2017 Iowa return. In early 2020 the taxpayer was notified that $4,000 of the unemployment benefits had to be repaid. The benefits were repaid by the end of 2020 . The taxpayer may claim a $4,000 income adjustment on line 24 of the 2020 Iowa return.

g. College Savings Iowa or Iowa Advisor 529 Education Savings Plans

If you or your spouse participate in the College Savings Iowa 529 Plan (Iowa Educational Savings Plan Trust) or the Iowa Advisor 529 Plan, each may deduct an amount contributed not to exceed $3,439 per beneficiary. This deduction is only available for contributions to Iowa 529 plans.

You must be the "participant" in the Iowa 529 plan in order to deduct your contributions. If you are not the "participant" in the Iowa 529 plan, you may not deduct your contributions to that plan.

Example: Adam and Tara have 2 children; Charlie and Ruth. Adam opens two 529 accounts – one for Charlie and one for Ruth. Tara also opens two 529 accounts one for Charlie and one for Ruth. Both Adam and Tara can take up to $3,439 per child’s account. Adam and Tara each are eligible for a deduction of up to $6,878. Adam and Tara’s total potential deduction amount is $13,756.

Only contributions to these two Iowa 529 plans qualify for a deduction on the Iowa return; however, a rollover from another state's 529 plan to one of the Iowa plans qualifies toward the deduction for Iowa income tax. If you received a refund of  any qualified higher education expenses from an eligible educational institution and recontributed the refund amount consistent with Iowa Code section 422.7(32)(c)(1)(f)(i), you may not deduct the recontribution amount when calculating your Iowa net income and the recontribution amount will not be considered when determining whether you have met the annual deduction cap.

Be sure you have properly shown these contributions as a deduction for one of these plans. Most computer software programs will ask for this information and correctly indicate the appropriate reason for the deduction.

Individuals making a contribution on or before the Iowa income tax return filing deadline (April 30 for calendar year tax filers), excluding extensions, can elect to have that contribution treated as though it was made on the last day of the preceding calendar year, which allows them to claim the income tax deduction for the most recently completed tax year.

h. Disability income exclusion

You may exclude from Iowa tax a portion of the disability pay you received in 2020 if you meet ALL of the following conditions:

  • You received disability pay, and
  • You were not yet 65 when your tax year ended, and
  • You retired on disability and were totally and permanently disabled when you retired, and
  • On January 1, 2020, you had not yet reached the age when your employer's retirement program would have required you to retire.

If you meet all of these conditions, obtain form IA 2440. You MUST complete form IA 2440 to take this exclusion. A doctor's statement must accompany each year's return attesting to the taxpayer's complete and permanent disability.

i. NONCONFORMITY ADJUSTMENT: Domestic production activities deduction resulting from a tax year beginning prior to January 1, 2019 (Expired)

RESERVED FOR FUTURE USE.

j. First-Time Homebuyer Savings Account qualifying contributions

You may deduct up to $2,137 ($4,274 for married filing jointly) in qualifying Iowa First-time Homebuyer Savings Account contributions made during the tax year. This deduction limitation is based on the account holder, so even though you may have contributed to multiple accounts for more than one beneficiary, your total deduction may not exceed $2,137 ($4,274 for married filing jointly).

Contributions are only deductible if they are made to accounts that have been designated as First-time Homebuyer Savings Accounts by submitting the Account Holder and Designated Beneficiary Form to the Department. The Account Holder and Designated Beneficiary Form must be submitted to the Department by April 30 of the calendar year following the year in which you opened the account to the address on that form.

For example, if you opened the account in 2020, the form is due no later than April 30, 2021. The April 30 deadline applies even if you are a fiscal year filer. The Account Holder and Designated Beneficiary Form must be submitted to the Department separately from your 2020 Iowa Income tax return.

Taxpayers are also required  to complete an Iowa Department of Revenue annual report form and include it with their Iowa income tax return.

Complete and send a Withdrawal Form, 41-163 to the Iowa Department of Revenue when money is withdrawn. Note: this form must be submitted to the department within ninety (90) days of the date of any withdrawal of funds in any amount from the first-time homebuyer savings account.

Interest and earnings income from a qualified First-Time Homebuyers Savings Account are exempt from Iowa individual income tax.

k. Employer Social Security Credit from federal return

If your business was in the food or beverage industry and you claimed a credit for a portion of employer Social Security tax on employee tips, you may claim a deduction on line 24 for this credit.

l. Federal Alcohol Fuel & Cellulosic Biofuel Credit from federal return

If you claimed an Alcohol Fuel Credit on your federal tax return, enter the amount of your Alcohol Fuel Credit here and attach a copy of federal form 6478.

m. Foreign-earned income exclusion or foreign housing deduction from federal form 2555

Do not include any amount of foreign-earned income exclusion or foreign housing deduction already reported on IA 1040, line 14, code "m".

n. Gains or losses from distressed sale transactions

o. Health savings account deduction from federal form 1040, Schedule 1, line 12.

p. Injured veterans program, contributions to

Do not put on IA Schedule A.

An Injured Veteran's Grant Program is available under the Iowa Department of Veteran Affairs. Money appropriated for these grants will be given to veterans injured in a combat zone after September 11, 2001. The grants cannot exceed $10,000 per injured veteran. The Department of Veteran Affairs may also receive money from any public or private source for purposes of providing grants to injured veterans.

A deduction is allowed for the amount paid by a taxpayer to the Department of Veteran Affairs for the purposes of providing grants to the Injured Veterans Grant Program. Do not claim these amounts on the Iowa Schedule A.

q. Injured veterans program, grants from

The amount of Department of Veteran Affairs grant money received by an injured veteran that is included in the veteran's federal adjusted gross income is not included in the veteran's Iowa net income.

r. In-home health care

To the extent included in Iowa gross income, deduct any state Supplementary Assistance payments received for unskilled in-home health-related care services to a family member.

s. Iowa Veterans Trust Fund

Income from the Iowa Veterans Trust Fund for the following items can be excluded from Iowa individual income tax:

  • Travel expenses directly related to follow-up medical care for wounded veterans and their spouses
  • Unemployment assistance during a period of unemployment due to prolonged physical or mental illness or disability resulting from military service

t. Military exemptions

Information: Tax Responsibilities of Military Personnel

u. Net operating loss, Iowa

Residents: Enter any Iowa net operating loss carryforward/carryback and attach the IA 123 and supporting documentation, if any.

Nonresidents: Enter any Iowa-source net operating loss carryforward/carryback on your Schedule IA 126. Nonresidents do not enter net operating losses on the IA 1040 return. Attach the IA 123 and supporting documentation, if any.

See Iowa Net Operating Loss Worksheet for additional information on the carryforward/carryback provisions.

v. Organ transplant expenses

A deduction in computing Iowa adjusted gross income is allowed for taxpayers for unreimbursed expenses relating to a human organ transplant. The taxpayer, while living, who donates all or part of a designated human organ can claim a deduction for unreimbursed expenses such as travel expenses, lodging expenses, and lost wages.

The deduction is limited to $10,000, and a taxpayer can only claim this deduction once. If a taxpayer claims this deduction for Iowa tax purposes, the taxpayer cannot also claim these same unreimbursed expenses as an itemized deduction for medical expenses on the Iowa return.

w. Partnership income and / or S corporation income: Modifications that decreased the income (including Biodiesel Production Refund)

Enter modifications that decrease the income reported on line 10 of the IA 1040.

Any biodiesel production refund received is not included as income for Iowa individual income tax purposes.

x. Segal AmeriCorps Education Award Payments

Federal Segal AmeriCorps education award payments are excluded from Iowa individual income tax.

y. Speculative shell buildings

If you are the owner of a qualifying speculative shell building, enter the difference between the depreciation taken on this building on your federal return and the depreciation that you could take under the accelerated cost recovery system of the Internal Revenue Code if the building were classified as 15-year property. Include a worksheet showing this calculation.

z. Student Loan Interest Deduction from federal return

Enter the same figure that is allowed on your federal form 1040, Schedule 1, line 20.

aa. Victim compensation awards

To the extent included in federal adjusted gross income, the following items can be excluded from Iowa adjusted gross income for individual income tax:

  • Amounts of victim compensation awards paid under the victim compensation program administered by the Department of Justice under Iowa Code section 915.81
  • Amounts of victim restitution payments received pursuant to Iowa Code chapters 910 and 915
  • Amounts of damages awarded by a court, and received by a taxpayer, in a civil action filed by the victim against an offender

bb. Wages paid to certain individuals (ex-offenders & disabled)

If you operate a business, you may qualify for an additional deduction of 65% of the wages paid in the first 12 months up to a maximum deduction of $20,000 per qualifying new employee. This deduction is in addition to the wage deduction you were allowed on federal Schedule C. To qualify, the new employee(s) must be disabled or an ex-offender on parole, probation, or in a work release program. All types of businesses may qualify for this deduction for hiring qualifying ex-offenders. However, the deduction for hiring qualifying persons with disabilities is restricted to certain small businesses.

Further information is available online:

cc. Work Opportunity Credit

If you claimed a Work Opportunity Credit on your federal income tax return, enter the amount here.

dd. Other federal adjustments

Other federal adjustments prior to the calculation of federal 1040 line 11 (federal AGI) not already taken on the IA 1040.

Report excess deductions of IRC section 67(e) expenses from estates and non-grantor trusts federal Schedule K-1 (Form 1041), box 11, code A as reported on federal Schedule 1, line 22.

Do not report federal unemployment compensation exclusion amounts on this line, report on line 14.

ee. Educator Expenses

For tax year 2020, enter out-of-pocket teacher expenses as allowed on the federal 1040, Schedule I, line 10.

ff. Tuition and Fees Deductions

For tax year 2020, enter the amount from the federal 1040 or federal 1040A.

NOTE: This deduction can only be taken on the Iowa return if the same deduction was taken for federal tax purposes - if the federal Lifetime Learning or American Opportunity credits were taken in lieu of the deduction, no deduction is allowed on the IA1040 even though those credits are not allowed for Iowa purposes.

gg. Nonresident Electric Utility Worker Training and Emergency Response Work Reciprocity

The income a nonresident individual earns for performing emergency response work for an electric utility in Iowa under a mutual aid agreement between Iowa and the state in which the nonresident lives is excluded from Iowa individual income tax. Income received by a nonresident individual for training by an electric utility in Iowa is also excluded.

hh. Rapid Response to State Disasters

Out-of-state businesses and individuals performing disaster or emergency-related work in Iowa are not subject to Iowa income tax or withholding. The disaster response period starts ten days before the state-declared or presidential-declared disaster and ends sixty days after the end of the declared state disaster or emergency.

ii. Iowa ABLE (Achieving a Better Life Experience) Savings Plan Trust

Contributions to a qualified ABLE savings plan trust made during 2020, on behalf of a designated beneficiary, are deductible from Iowa individual income tax up to a maximum amount, $3,387, allowed per beneficiary per year for purposes of the Iowa education savings plan trust in Iowa Code chapter 12D. Interest and earnings income from ABLE are exempt from Iowa individual income tax.

jj. Charitable Contributions

Charitable contribution for non-itemizers from federal form 1040, line 10b. The charitable contribution cannot exceed $300. IA 1040, Schedule A may not contain any charitable contributions which were deducted on this line.

kk. Broadband Infrastructure Grant

Enter the amount of a federal, state, or local grant provided to a communications service provider during the tax year, to the extent included on Schedule C, line 1, if the grant was used to install broadband infrastructure that facilitates broadband service in targeted service areas at or above the download and upload speeds.

ll. Iowa Qualifying COVID-19 Grants

Enter the amount of an Iowa qualifying COVID-19 grant eligible for exclusion from Iowa income. The exclusion applies only to the extent the qualifying COVID-19 grant was included in your federal income tax and reported as taxable income on this Iowa return. The exclusion is reported as an adjustment on line 24, regardless of the line where the grant income is reported on the IA 1040. For more information on the Iowa qualifying COVID-19 grant exclusion, including qualifying grant programs, see the Department’s guidance, Qualifying COVID-19 Grants - Income and Franchise Tax Exclusion.

Married Separate Filers:

When the adjustment is attributable to a specific spouse, it is taken by that spouse.

When the adjustment is not attributable to any one spouse, it must be prorated based on the net income amounts on line 26. Calculate through line 26 as if the adjustment in question were excluded.

If the adjustment is attributable to a dependent, such as the student loan interest deduction, it is prorated based on net income before the adjustment in question.

(Examples of how to prorate)

Go to Line 23

Go to Line 25