2014 Tax Year Information
NOTE: The United States Supreme Court decision issued on May 18, 2015, in the Comptroller of the Treasury of Maryland v. Wynne case, impacted many states, including Iowa. For Iowa purposes, the decision requires the out-of-state tax credit to be applied prior to other nonrefundable Iowa tax credits and before calculation of any school district surtax or EMS surtax. Therefore, the out-of-state tax credit calculated on form IA 130 should be entered on line 50 of the IA 1040, rather than on line 57. In addition, a credit can also now be claimed on the IA 130 for income taxes paid to local jurisdictions in other states. For additional details see The Wynne Decision.
Iowa did not couple with the bonus depreciation provisions allowed for federal tax purposes for the 2014 tax year.
For Individual Income Tax Filers Only:
- While social security benefits are not subject to Iowa income tax, the reportable Social Security benefit amount is included in the alternate tax calculation worksheet and the tax reduction worksheet, as well as the calculation of whether sufficient income was earned in order to file an Iowa return. See the Social Security Worksheet under Step 4 of the IA 1040 instruction booklet.
- Military retirement pay is not included on line 9 since it is not subject to Iowa income tax.
- Allow deduction of educator expenses
- Allow tuition and fees deduction for higher education
- Allow election to deduct state sales/use tax as an itemized deduction in lieu of state income tax
- Allow treatment of mortgage insurance premiums as qualified residence interest
- Allow tax free distribution from an IRA to certain charities for individuals 70 ½ and older
- Federal tax includes the net investment income tax on Federal Form 8960. Federal tax does not include the additional Medicare tax on Federal Form 8959 and does not include the Shared Responsibility Payment reported on line 61 of the federal 1040 return.
- The volunteer firefighter/EMS/reserve peace officer credit is increased to $100. State certified reserve peace officers are now eligible for the credit.
- The Iowa earned income tax credit is 15% of the federal earned income tax credit.
- An Iowa adoption credit is available for the first $2,500 of unreimbursed expenses related to an adoption.
- A taxpayers trust fund tax credit of $15 is available for each taxpayer who files a 2014 Iowa 1040 return by November 2, 2015. The credit is limited to the lesser of the amount shown on line 63 or $15.
- Taxpayers claiming adoption expenses on line 27 of the Iowa Schedule A must exclude those expenses eligible for the Iowa adoption tax credit in calculating the deduction.
For Individual Income Tax Filers as well as Corporation Income Tax (including S corporations), Partnership and Fiduciary Income tax:
- The Iowa solar energy system tax credit is 60% of the federal solar energy credit, with a maximum Iowa credit for a residential installation of $5,000 and a maximum Iowa credit for a business installation of $20,000. This credit is also available for franchise tax filers.
- A farm to food donation tax credit is available for producers of food who donate food to an Iowa food bank or an Iowa emergency feeding organization. See the 2014 Expanded Instructions for more details on this credit.
- 2014 section 179 limit for Iowa is $500,000 which is the same as the federal section 179 limit. The phase-out threshold is $2 million.