 |
Iowa Code (Last Updated: December 05, 2016) |
 |
Title X. FINANCIAL RESOURCES |
|
Chapter 422. INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES |
Section 422.9. Deductions from net income.
-
In computing taxable income of individuals, there shall be deducted from net income the larger of the following amounts:
1. An optional standard deduction, after deduction of federal income tax, equal to one thousand two hundred thirty dollars for a married person who files separately or a single person or equal to three thousand thirty dollars for a husband and wife who file a joint return, a surviving spouse, or a head of household. The optional standard deduction shall not exceed the amount remaining after deduction of the federal income tax. The amount of federal income tax deducted shall be computed as provided in subsection 2, paragraph “b”.
2. The total of contributions, interest, taxes, medical expense, nonbusiness losses, and miscellaneous expenses deductible for federal income tax purposes under the Internal Revenue Code, with the following adjustments:
a. Subtract the deduction for Iowa income taxes.
b. Add the amount of federal income taxes paid or accrued, as the case may be, during the tax year and subtract any federal income tax refunds received during the tax year. Where married persons, who have filed a joint federal income tax return, file separately, such total shall be divided between them according to the portion of the total paid or accrued, as the case may be, by each. Federal income taxes paid for a tax year in which an Iowa return was not required to be filed shall not be added and federal income tax refunds received from a tax year in which an Iowa return was not required to be filed shall not be subtracted.
c. Add the amount by which expenses paid or incurred in connection with the adoption of a child by the taxpayer exceed three percent of the net income of the taxpayer, or of the taxpayer and spouse in the case of a joint return. The expenses may include medical and hospital expenses of the biological mother which are incident to the child’s birth and are paid by the taxpayer, welfare agency fees, legal fees, and all other fees and costs relating to the adoption of a child if the child is placed by a child-placing agency licensed under chapter 238 or by a person making an independent placement according to the provisions of chapter 600. If the taxpayer claims an adoption tax credit under section 422.12A, the taxpayer shall recompute for purposes of this subsection the amount of the deduction by excluding the amount of qualified adoption expenses, as defined in section 422.12A, used in computing the adoption tax credit.
d. Add an additional deduction for mileage incurred by the taxpayer in voluntary work for a charitable organization consisting of the excess of the state employee mileage reimbursement over the amount deductible for federal income tax purposes. The deduction shall be proven by the keeping of a contemporaneous diary by the person throughout the period of the voluntary work in the tax year.
e. Add the amount, not to exceed five thousand dollars, of expenses not otherwise deductible under this section actually incurred in the home of the taxpayer for the care of a person who is the grandchild, child, parent, or grandparent of the taxpayer or the taxpayer’s spouse and who is unable, by reason of physical or mental disability, to live independently and is receiving, or would be eligible to receive if living in a health care facility licensed under chapter 135C, medical assistance benefits under chapter 249A. In the event that the person being cared for is receiving assistance benefits under chapter 239B, the expenses not otherwise deductible shall be the net difference between the expenses actually incurred in caring for the person and the assistance benefits received under chapter 239B.
f. Add the amount of the mortgage interest credit allowable for the tax year under section 25 of the Internal Revenue Code to the extent the credit decreased the amount of interest deductible under section 163(g) of the Internal Revenue Code.
g. If the taxpayer has a deduction for medical care expenses under section 213 of the Internal Revenue Code, the taxpayer shall recompute for the purposes of this subsection the amount of the deduction under section 213 by excluding from medical care, as defined in section 213, the amount subtracted under section 422.7, subsection 29.
h. For purposes of calculating the deductions in this subsection that are authorized under the Internal Revenue Code, and to the extent that any of such deductions is determined by an individual’s federal adjusted gross income, the individual’s federal adjusted gross income is computed in accordance with section 422.7, subsections 39, 39A, 39B, and 53.
i. The deduction for state sales and use taxes is allowable only if the taxpayer elected to deduct the state sales and use taxes in lieu of state income taxes under section 164 of the Internal Revenue Code. A deduction for state sales and use taxes is not allowed if the taxpayer has taken the deduction for state income taxes or claimed the standard deduction under section 63 of the Internal Revenue Code. This paragraph applies to taxable years beginning after December 31, 2003, and before January 1, 2008, and to taxable years beginning after December 31, 2009, and before January 1, 2015.
3. If, after applying all of the adjustments provided for in section 422.7, the allocation provisions of section 422.8, and the deductions allowable in this section subject to the modifications provided in section 172(d) of the Internal Revenue Code, the taxable income results in a net operating loss, the net operating loss shall be deducted as follows:
a. The Iowa net operating loss shall be carried back three taxable years for an individual taxpayer with a casualty or theft property loss or for a net operating loss in a presidentially declared disaster area incurred by a taxpayer engaged in a small business or in the trade or business of farming. For all other Iowa net operating losses, the net operating loss shall be carried back two taxable years or to the taxable year in which the taxpayer first earned income in Iowa whichever year is the later.
b. The Iowa net operating loss remaining after being carried back as required in paragraph “a” or “d” or if not required to be carried back shall be carried forward twenty taxable years.
c. If the election under section 172(b)(3) of the Internal Revenue Code is made, the Iowa net operating loss shall be carried forward twenty taxable years.
d. Notwithstanding paragraph “a”, for a taxpayer who is engaged in the trade or business of farming as defined in section 263A(e)(4) of the Internal Revenue Code and has a loss from farming as defined in section 172(b)(1)(F) of the Internal Revenue Code including modifications prescribed by rule by the director, the Iowa loss from the trade or business of farming is a net operating loss which may be carried back five taxable years prior to the taxable year of the loss.
4. Where married persons file separately, both must use the optional standard deduction if either elects to use it, and both must claim itemized deductions if either elects to claim itemized deductions.
5. A taxpayer affected by section 422.8 shall, if the optional standard deduction is not used, be permitted to deduct only such portion of the total referred to in subsection 2 above as is fairly and equitably allocable to Iowa under the rules prescribed by the director.
6. In determining the amount of deduction for federal income tax under subsection 1 or subsection 2, paragraph “b”, for tax years beginning in the 2008 calendar year, the amount of the deduction for the tax year shall not be adjusted by the amount received during the tax year of the income tax rebate provided pursuant to the federal Recovery Rebates and Economic Stimulus for the American People Act of 2008, Pub. L. No. 110-185, and the amount of such income tax rebate shall not be subject to taxation under this division.
7. A taxpayer is allowed to take the deduction for disaster-related casualty losses under section 165(h) of the Internal Revenue Code, as modified by the Heartland Disaster Relief Act of 2008, Pub. L. No. 110-343, in computing net income for state tax purposes.
[C35, §6943-f9; C39, §6943.041; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §422.9;
82 Acts, ch 1023, §9, 10, 30, 32
,
,
]
; 87 Acts, 2nd Ex, ch 1, §7 – 9
; 94 Acts, ch 1166, §4 – 6, 12
; 99 Acts, ch 95, §5, 6, 12, 13
; 2001 Acts, 1st Ex, ch 3, §1, 2
; 2002 Acts, ch 1069, §6, 13, 14
; 2003 Acts, ch 139, §6, 11, 12
; 2005 Acts, ch 24, §5, 10, 11
; 2005 Acts, ch 140, §37 – 39, 73
; 2011 Acts, ch 41, §3, 5, 20, 23, 24
; 2011 Acts, ch 131, §144, 146
2011 amendment to subsection 2, paragraph h, takes effect April 12, 2011, and applies retroactively to January 1, 2008, for tax years ending on or after that date;
Subsection 7 takes effect July 27, 2011, and applies retroactively to January 1, 2008, for tax years beginning on or after that date and before January 1, 2009; refunds limited to amounts paid in excess of tax liability, exclusive of interest;
2013 amendment to subsection 2, paragraph i, takes effect February 14, 2013, and applies retroactively to January 1, 2012, for tax years beginning on or after that date;
2014 amendment to subsection 2, paragraph c applies retroactively to January 1, 2014, for tax years beginning on or after that date;
2015 amendment to subsection 2, paragraph i, takes effect February 17, 2015, and applies retroactively to January 1, 2014, for tax years beginning on or after that date; 2015 Acts, ch 1, §7, 8
Subsection 2, paragraph i amended