More About the Iowa Tax Laws Enacted April 12

The Iowa legislature has finally enacted tax provisions that affect 2010 tax returns.  Most of the coverage has focused on Section 179 expense limits, but there are other provisions that are affected, which may cause the need to file an amended return.  Luckily, the changes involve deductions that Iowans are now entitled to, thus resulting in larger refunds due.

Here are some of the highlights:

  • For 2010 and forward, Iowa will allow the $250 deduction for out-of-pocket classroom expenses of K-12 teachers.  In the past, this deduction has not been allowed on state returns.
  • For 2010 and forward, Iowa will allow the same deduction for tuition and fees as claimed on the federal return.  Again, Iowa has not allowed this deduction in the past.
  • For 2010 and forward, the Iowa Earned Income Credit is simply 7% of the federal Earned Income Credit, without the need to do mind-numbing recalculations (read about the recalculations in this Dinesen Tax Times article).
  • For 2010 and forward, Iowa is coupling with federal law that allows people age 70 1/2 and older to distribute up to $100,000 out of IRAs to charity without having to claim the distribution as income.
  • For 2010, Iowa is coupling with federal law in allowing up to $10,000 of start-up expenses to be deducted (instead of $5,000).
  • And as detailed before, for 2010 and forward, Iowa will couple with federal law on Section 179 expensing.  The Iowa Section 179 limit is now $500,000, same allowed on federal returns.

These provisions appear to be in place for all of 2011 as well, so Iowa tax law appears set for at least another year, at least as far as these items are concerned.