2007 Iowa Income Tax Information 2007
Additional Expanded Instructions are available online at www.state.ia.us/tax.
Due date. Iowa income tax returns are due April 30, 2008.
Farmers and commercial fishers. If at least 2/3 of your income is from farming or commercial fishing, you may avoid penalty for underpayment of estimated tax in one of the following ways: (1) Pay the estimated tax in one payment on or before January 15, 2008, and file the Iowa income tax return by April 30, 2008, or (2) file the Iowa income tax return and pay the tax due in full on or before March 1, 2008.
Who must file?
You must file an Iowa return if you were a resident or part-year resident of Iowa in 2007 and meet any of the following requirements. Nonresidents, see items f. and g.
NOTE: In meeting the filing requirements below, both incomes of husband and wife must be included, and any pension/retirement income exclusion (line 21 of the IA1040) and any Social Security phase-out amount from line 12 of the Social Security worksheet (page 2) must be added back.
- You had a net income (line 26 of the IA1040) of more than $9,000 and your filing status is single. ($18,000 if 65 or older on 12/31/07)
- You had a net income (line 26 of the IA1040) of more than $13,500 and your filing status is other than single. ($24,000 if your or your spouse is 65 or older on 12/31/07)
- You were claimed as a dependent on another person’s Iowa return and had a net income (line 26 of the IA1040) of $5,000 or more.
- You were in the military service with Iowa shown as your legal residence even though stationed outside of Iowa.
- You were subject to Iowa lump-sum tax.
- You were a nonresident or part-year resident and your net income from Iowa sources (line 26 of the IA126) was $1,000 or more, unless below the income thresholds above
- You were a nonresident or part-year resident and subject to Iowa lump-sum tax or Iowa minimum tax (even if line 26 of IA 126 is less than $1,000).
Nonresidents and part-year residents. If you are a nonresident or a part-year resident with income from Iowa sources, you must complete both the IA1040 and the IA126. See instructions, page 8.
Iowa and Illinois reciprocal agreement. Any wages or salary made by an Iowa resident working in Illinois is taxable only to Iowa and not to Illinois. Any wages or salary made by an Illinois resident working in Iowa is taxable only to Illinois and not to Iowa.
An Iowa resident working for wages or salary in Illinois should complete and file Illinois form IL-W-5-NR “Employee’s Statement of Nonresidence in Illinois” with the employer so that the employer will withhold Iowa income tax.
An Illinois resident working for wages or salary in Iowa should complete and file the IA 44-016 “Employee’s Statement of Nonresidence in Iowa” with the employer so that the employer will withhold Illinois income tax.
Iowa will tax any Iowa-source income received by an Illinois resident that is not from wages or salaries. Illinois will tax any Illinois-source income received by an Iowa resident that is not from wages or salaries. Examples: gambling winnings and unemployment compensation.
If Illinois income tax has been mistakenly withheld from the wages or salary of an Iowa resident, the Iowa resident must file an Illinois income tax return to get a refund.
Illinois residents who have had Iowa income tax withheld in error from their wages and have no other Iowa-source income must file an Iowa income tax return requesting a refund. They should complete Steps 1, 2, and 3 of the IA1040, show “0” on line 1 of Step 4 and line 26 of Step 5, write “Illinois resident tax withheld in error” on the face of the return. On the back of the IA1040 on lines 60, 67, 68, 69 and 70, enter the Iowa tax withheld, sign the return and attach copies of W-2s to the front of the return. Copies of Federal and Illinois returns must be attached.
Note to electronic filers: You must complete the entire IA1040 and IA126 in order to receive a refund when Iowa tax is withheld in error.
Extension requests. Iowa does not have an extension form to obtain additional time to file. To avoid the late-filing penalty, at least 90% of your total tax liability must be paid by April 30, 2008; you will automatically have until October 31, 2008, to file your return. You may, however, owe a 2210 penalty for failure to make estimate payments. You will owe interest on any tax due after April 30, 2008. If you need to make a tax payment to meet the 90% requirement, see payment options on the back cover of this booklet.
Military income. Information is available on the department’s Web site in the 2007 Expanded Instructions.
Injured spouse. The Federal “injured spouse” form is not recognized by the State of Iowa when using filing status 2 or filing status 3. If your spouse’s refund will be used to pay a Federal, state, county or city debt, we suggest each spouse file an IA 1040 long form, filing status 4. This will prevent your refund from being applied to your spouse’s debt.
Federal return. Including a copy of your Federal return with your Iowa return may help processing your Iowa return. This is not necessary if you file electronically.
NEW FOR 2007
Filing Threshold for 65 and older: See “Who must file?” above.
Line 13: Social Security Phase-out
Line 24: New deductions include (1) Film expenditure (2) Victim compensation awards (3) Vietnam veterans bonus
Reminder: Deductions for educator expenses and for tuition and textbook fees may be taken.
Line 65: Iowa Earned Income Credit is now refundable at 7% of
the Federal EIC.
Lines 53 and 66: Form IA 148 Tax Credits Schedule must be completed. The complete lists of these credits, including new ones for 2007, are online in the 2007 Expanded Instructions.
Iowa Schedule A: The itemized deduction for state sales and use tax paid is allowed only if the taxpayer claimed an itemized deduction for state sales and use tax paid on the Federal return.
2007 IA1040 INSTRUCTIONS
STEP 1 NAME / ADDRESS / SOCIAL SECURITY NUMBER
NAME AND ADDRESS: If the name or mailing address is incorrect on the preprinted form, make the corrections directly on the form.
ENTER YOUR / SPOUSE’S SOCIAL SECURITY NUMBER. IF YOU OR YOUR SPOUSE IS 65 OR OLDER on 12/31/07: Check the box by the Social Security box.
COUNTY: The list of Iowa counties and their numbers starts on page 16. If the number on the label is not correct, make the correction directly on the label. Enter the number of the county in which you lived on December 31, 2007. Nonresidents and part-year residents who moved out of Iowa before December 31, 2007, should enter “00.” Part-year residents who moved into Iowa should enter the number of the Iowa county in which you lived on December 31, 2007. Military personnel should enter the county number of their Iowa residence, even if the service member is not physically present in Iowa on the last day of the tax year.
SCHOOL DISTRICT NUMBER: The list of school district names, numbers and rates starts on page 16. The district to select is the one in which you lived on December 31, 2007. This is not necessarily the district where your children attended school. If the number on the label is not correct, make the correction directly on the label. Nonresidents: Those who did not live in Iowa at all during 2007 should enter “0000” for the school district number. Part-year residents who moved into Iowa should enter the Iowa school district in which you lived on the last day of 2007. If you moved out of Iowa before December 31, 2007, enter “9999.” Military personnel should enter the school district number of their Iowa residence, even if the service member is not physically present in Iowa on the last day of the tax year.
STEP 2 FILING STATUS
Married Taxpayers may reduce their tax liability by using filing status 3 or 4.
STATUS 1. Use if you were unmarried, divorced, or legally separated on December 31, 2007, and you do not meet the requirements for any other filing status.
STATUS 2. (a) You were husband and wife on December 31, 2007, or (b) Your spouse died during 2007 and you did not remarry during the year. If your spouse died during 2007 and had income, you can also file status 3 or 4.
STATUS 3. If you are married and want to file separately on one form.
STATUS 4. If you and your spouse file separately on two separate forms.
STATUS 5. If you are filing as head of household for Federal income tax purposes.
STATUS 6. If you meet the requirements for qualifying widow(er) for Federal income tax purposes.
STEP 3 EXEMPTIONS
Dependents filing their own returns should claim a $40 personal exemption credit even though they are claimed as a dependent on another person’s Iowa return.
STEP 4 GROSS INCOME
If you use filing status 3 (married filing separately on combined return), complete both columns A and B of the IA 1040. All other filing statuses need to complete only column A. ALL taxpayers, including nonresidents and part-year residents, report income from ALL SOURCES in this section. Nonresidents and part-year residents also report Iowa-source income on Schedule IA 126, where a CREDIT is calculated.
LINE 1. Wages, Salaries, Tips, Etc
Report the same W-2 income as shown on your Federal income tax return, including military income. See online Expanded Instructions, line 24 for allowable military adjustments.
MARRIED SEPARATE FILERS: W-2 income is reported by the spouse earning the income.
LINE 2. Taxable Interest Income
Include the same amounts of interest income reported on your Federal return with the following modifications:
- Add interest from state and municipal securities unless specifically exempt from Iowa tax. The following securities are exempt: Aviation Authority Bonds, IA Code sec. 330A.16; Beginning Farmer Loan Program Bonds, IA Code sec. 175.17; Community College Bond Program Bonds, IA Code sec. 260C.71(6); Community College Residence Halls and Dormitories Bonds, IA Code sec. 260C.61; County Health Center Bonds, IA Code sec. 331.441(2)C(7); E911 Emergency Telephone Service Program Bonds, IA Code sec. 34A.20(6); Interstate Bridges Bonds, IA Code sec. 313A.36; IA Board of Regents Bonds for buildings and facilities, IA Code chapters 262.41, 262.51 and 262.60; IA College Super Savings Plan Bonds, IA Code chapter 262A; IA Higher Education Loan Authority, IA Code sec. 261A.27; IA Municipality Urban Renewal Bonds, IA Code sec. 403.9(2); IA Rural Water District Revenue Bonds and Notes, IA Code sec. 357A.15; Local Government Flood Damage Program, IA Code sec. 16.183(4); Low Income Housing Bonds, IA Code sec. 403A.12; Municipal Investment Recovery Bonds, IA Code sec. 16.173(4); Prison Infrastructure Revenue Bonds, IA Code sec. 16.177(8); Regents Institutions Medical and Hospital Buildings at University of IA Bonds, IA Code sec. 263A.6; Soil Conservation Districts Revenue Bonds, IA Code sec. 161A.22; Quad Cities Interstate Metropolitan Authority Bonds, IA Code chapter 28A.24; Sewage Treatment Works Revenue Bonds, IA Code sec. 16.131(6); Underground Storage Tank Fund Revenue Bonds, IA Code sec. 455G.6(14); Vision IA Program, IA Code sec. 12.71; Warehouse Project Revenue Bonds, IA Code chapter 123.159; IA Utilities Board and Consumer Advocate Building Bonds, IA Code sec. 422.7(45); Honey Creek Premier Destination Park Bonds, IA Code sec. 463C.12(8).
- Deduct interest received from Federal securities (for example, U.S. Savings Bonds, U.S. Treasury Notes). Do not subtract interest from repurchase agreements of U.S. Government securities. The following are taxable: Government National Mortgage Assoc. (Ginnie Mae) Securities; Federal National Mortgage Assoc. (Fannie Mae) Securities; Federal Home Loan Mortgage Assoc. (Freddie Mac) Securities; Money Market Certificates.
MARRIED SEPARATE FILERS: Divide interest income based on ownership of the account or certificate.
- Jointly held: divide equally between spouses.
- Held in the name of only one spouse: allocate interest wholly to that spouse.
LINE 3. Ordinary Dividend Income
Report the same dividends as you reported on your Federal return with the following modifications:
- Add all dividends from mutual funds, investment trusts, or regulated investment companies investing in state and municipal bonds.
- Deduct that portion of any net dividends from a mutual fund, investment trust, or regulated investment company that is attributable to Federal securities.
MARRIED SEPARATE FILERS: Divide dividends based on registered ownership of stock.
- Jointly held: divide equally between spouses.
- Held in the name of only one spouse: allocate dividends wholly to that spouse.
LINE 4. Alimony Received
Include the same alimony as is shown on your Federal return.
MARRIED SEPARATE FILERS: Reported by the spouse who received the alimony.
LINE 5. Business Income/Loss
Report the net business income or loss from Federal Schedule C or C-EZ. Attach a copy of the Federal form.
MARRIED SEPARATE FILERS: Reported by the spouse deriving the income or loss.
LINE 6. Capital Gain/Loss
Enter 100% of any capital gain or loss as reported on line 13 of your Federal 1040. Do not subtract any Iowa capital gain deduction on this line. See line 23. Attach a copy of your Federal Schedule D.
MARRIED SEPARATE FILERS: Taxpayers who filed separate Federal returns should report capital gains or losses as reported for Federal tax purposes. If a joint Federal return was filed, each spouse must report capital gains on the basis of ownership of the property sold or exchanged. The combined net capital gain or loss must be the same as reported on the joint Federal return.
LINE 7. Other Gains/Losses
If you sold or exchanged assets used in a trade or business and completed Federal form 4797, enter 100% of the gain or loss. Attach a copy of Federal form 4797.
MARRIED SEPARATE FILERS: Divide gains or losses based on ownership of the asset sold or exchanged.
LINE 8. Taxable IRA Distributions
Enter the amount of taxable IRA distributions as shown on your Federal return.
MARRIED SEPARATE FILERS: Taxable IRA distributions should be reported by the spouse whose name is on the account.
LINE 9. Taxable Pensions and Annuities
The same amounts of pensions and annuities are taxable for Iowa as are taxable on your Federal return, except Railroad Retirement benefits paid by the Railroad Retirement Board. These are not taxable on the Iowa return. Do not subtract any Iowa pension exclusion on this line. See line 21.
MARRIED SEPARATE FILERS: The taxable portion of pensions and annuities is reported by the spouse who received the income.
LINE 10. Rents, Royalties, Partnerships, Estates, Etc
Report the income or loss from Federal Schedule E and attach a copy.
MARRIED SEPARATE FILERS: Divide income or loss from Schedule E based upon ownership of the asset-producing income or partnership interest or individual named as beneficiary.
LINE 11. Farm Income/Loss
Enter the income or loss from Federal Schedule F. Attach a copy to your Iowa return.
MARRIED SEPARATE FILERS: Farm income must be reported by the spouse who claims it for self-employment tax purposes on the Federal Schedule SE.
LINE 12. Unemploymennt Compensation
Enter the amount of unemployment compensation benefits that was taxable on your Federal return, except for unemployment compensation and sickness insurance benefits paid by the Railroad Retirement Board.
MARRIED SEPARATE FILERS: If both spouses received unemployment benefits, each of the spouses should report the benefits received as shown on the 1099-G for each spouse.
LINE 13. Taxable Social Security Benefits
Iowa does not tax Social Security benefits in the same manner as the Internal Revenue Service. Iowa is implementing a gradual phase-out of the tax on Social Security income. For tax year 2007, the phase-out percentage is 32%. To compute the amount of Social Security benefits that are taxable to Iowa, complete the worksheet below.
Line 13 Social Security Worksheet |
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| 1. Enter the amount from Box 5 of form(s) SSA-1099. If you filed a joint Federal return, enter the totals for both spouses. Do not include Railroad Retirement benefits from form RRB-1099 here. | 1. _______ |
| 2. Enter one-half of line 1 amount. | 2. _______ |
| 3. Add amounts from the Federal 1040 on lines 7, 8a, 9a, 10, 11, 12, 13, 14, 15b, 16b, 17, 18, 19, and 21, plus one-half of any Railroad Retirement Social Security benefits from RRB-1099.* If filing Federal 1040A, use lines 7, 8a, 9a, 10, 11b, 12b and 13, plus one-half of any Railroad Retirement Social Security benefits from RRB-1099. Include any bonus depreciation adjustment from line 14 of the Iowa 1040 to compute correct amount. | 3. _______ |
| 4. Enter the amount from line 8b of your Federal 1040 or 1040A. | 4. _______ |
| 5. Add lines 2, 3, and 4. | 5. _______ |
| 6. Enter total adjustments from Federal 1040, lines 23 through 32, plus any write-in adjustments you entered on the dotted line next to line 36. If filing Federal 1040A, use the total of lines 16, 17, and 19. | 6. _______ |
| 7. Subtract line 6 from line 5. | 7. _______ |
| 8. Enter one of the following amounts based on the Federal filing status used on form 1040 or 1040A Single, head of household, qualifying widow(er): enter $25,000. — Married filing joint: enter $32,000. — Married filing separate: enter -0- if you lived with your spouse at anytime in 2007 or $25,000 if you did not live with your spouse at any time in 2007. | 8. _______ |
| 9. Subtract line 8 from line 7. If zero or less, enter -0-. If line 9 is zero, none of the Social Security benefits are taxable. | 9. _______ |
| 10. Enter one-half of line 9. | 10. _______ |
| 11. Iowa Taxable Social Security Benefits before Phase-out: Enter the smaller of line 2 or line 10 | 11. _______ |
| 12. Iowa Taxable Social Security Phase-out: Multiply line 11 by 32% (.32) | 12. _______ |
| 13. Iowa Taxable Social Security after Phase-out (Reduced Iowa Taxable Social Security): Subtract line 12 from line 11 and enter here and on line 13 of form IA 1040. | 13. _______ |
| *Include the following incomes or adjustments to income on line 3 if applicable. (These were excluded from Federal AGI.): Foreign earned income, income excluded by residents of Puerto Rico, American Samoa and proceeds from Savings Bonds used for higher education and employer-provided adoption benefits. Although Railroad Retirement benefits are not taxable, one-half of the benefits received must be used to determine the amount of Social Security benefits that are taxable to Iowa. For purposes of determining taxable Social Security benefits, you must also include interest from Federal securities.
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MARRIED SEPARATE FILERS:
- If both spouses received Social Security benefits, the taxable amount is allocated between the spouses in the ratio of the benefits received by one spouse to the total benefits received.
- If only one spouse received benefits, that spouse should report the portion of the benefits that is taxable.
LINE 14. Other Income, Gambling Income, Bonus Depreciation Adjustment
Enter taxable income not reported on lines 1-13. Write an explanation of the type of income. Examples of income to be reported include:
- Baby-sitting income not reported on Federal Schedule C or C-EZ.
- Bonus depreciation adjustment from the IA 4562A; attach the IA 4562A to your return.
- Capital gains from installment sales in 2007: Accrual-method taxpayers may now use the installment method for reporting capital gains on their Iowa returns.
- College Savings Iowa: Income received from the cancellation of a participation agreement to the extent the amount was previously deducted on line 24 of the IA 1040.
- Director’s fees
- Drilling: Intangible drilling costs that were reported on Federal form 6251 less any amounts amortized in the tax year.
- Executor’s fees
- Gambling winnings: You must report the full amount of gambling winnings. Report any Iowa tax withheld on line 60 of the IA 1040. Gambling losses may be reported as an itemized deduction on Schedule A, but you cannot deduct more than the winnings you report.
- Partnership income and/or S Corporation income: Modifications that increased the income.
- Refundable Iowa credits received in 2007 which were included as income on the Federal 1040 must also be added back. This includes Cow-Calf refunds received in 2007 (unless reported on Federal Schedule F).
- Refunds: State income tax refunds other than Iowa to the extent that the tax refunded in 2007 was deducted on a prior Iowa return.
- Wells: Percentage depletion from an oil, gas or geothermal well that was reported on Federal form 6251.
- Other income as reported on line 21 of the Federal 1040. MARRIED SEPARATE FILERS: The spouse to whom the income was paid must report that income.
STEP 5 ADJUSTMENTS TO INCOME
All taxpayers report adjustments from all sources in this section.
NONRESIDENTS AND PART-YEAR RESIDENTS also report Iowa-source adjustments to income on the Schedule IA 126.
LINE 16. Payments to an IRA, KEOGH or SEP
Enter the amount claimed on your Federal tax return for payments made to your IRA, Keogh Plan, SEP, SIMPLE, or Qualified Plans. Payments to a ROTH
IRA are not deductible.
MARRIED SEPARATE FILERS:
- If only one spouse has earned income, that individual can contribute up to $4,000 per year ($5,000 if 50 or older) to an IRA account of the nonworking spouse and up to $4,000 per year ($5,000 if 50 or older) to an IRA account of the individual.
- If both spouses earned income and made contributions to an IRA account, each spouse must claim his or her own contribution, not to exceed $4,000 per spouse ($5,000 if 50 or older).
- If both spouses made contributions to an IRA but only a portion of the contribution is deductible on the Federal return, the amount of the IRA deduction that is allowed for Federal income tax purposes must be allocated between the spouses in the ratio of the IRA contribution made by each spouse to the total IRA contribution made by both spouses.
- For Keogh Plans, SEPs, SIMPLE, or Qualified Plans, each spouse
must claim his or her individual contributions.
LINE 17. One-half of Self-employment Tax
Enter the amount of self-employment tax that was deductible on line 27 of your Federal 1040 in computing Federal adjusted gross income.
MARRIED SEPARATE FILERS: The deduction is allocated in the ratio of self-employment tax paid by each spouse to the total self-employment tax paid.
LINE 18. Health Insurance Deduction
Enter 100% of the amount paid for health and dental insurance premiums. This includes all supplemental health insurance, such as Medicare B supplemental medical insurance and Medicare D voluntary prescription drug insurance program (not “Medicare tax withheld” on your W-2) and long-term nursing home coverage. Schedule A may not contain any health insurance premiums which were used as a deduction on line 18. Note that no deduction is available to any individual who paid health insurance premiums on a pretax basis.
MARRIED SEPARATE FILERS: If one spouse is employed and has will claim the entire deduction. If both spouses pay health insurance premiums through their wages, each spouse will claim what he/she paid.
If both spouses have self-employment income, the deduction for self-employed health insurance must be allocated between the spouses in the ratio of each spouse’s self-employment income to the total self-employment income of both spouses. If health insurance premiums are paid directly by one spouse, that spouse will claim the entire deduction. If both spouses paid through a joint checking account, the deduction would be allocated between the spouses in the ratio of each spouse’s net income to the total net income of both spouses. For this net income calculation, do not include line 18, the health insurance deduction.
LINE 19. Penalty on Early Withdrawal of Savings
Enter the amount of any penalty you were charged because you withdrew funds from your time savings deposit before its maturity.
MARRIED SEPARATE FILERS: Divide the penalty amount between spouses based upon registered ownership of the time deposit.
LINE 20. Alimony Paid
Enter the amount of alimony payments or separate maintenance payments that were deductible on your Federal tax return.
MARRIED SEPARATE FILERS: Only the spouse liable for these payments can deduct the alimony paid.
LINE 21. Pension/Retirement Income Exclusion
If you or your spouse receive a pension, an annuity, a self-employed retirement plan, deferred compensation, IRA distribution or other retirement plan benefits, you may be eligible to exclude from Iowa income tax part or all of the retirement income that is taxable on your Federal return. Social Security benefits are not included. The exclusion can be up to $6,000 for individuals who file status 1, 5 or 6 and up to $12,000 for married taxpayers who file status 2, 3 or 4. To take this exclusion you or your spouse must meet one of the following conditions:
- 55 years of age or older on December 31, 2007, or
- disabled, or
- a surviving spouse or a survivor having an insurable interest in an individual who would have qualified for the exclusion in 2007 on the basis of age or disability.
MARRIED SEPARATE FILERS: If both spouses have pension income, whether both or only one meet the eligibility requirements, the exclusion of up to $12,000 is prorated between them in the ratio that each spouse’s pension relates to the total pension received by both spouses. If only one spouse has pension income, that spouse would take the entire exclusion of up to $12,000. The spouse who has no pension income would receive no exclusion, even if that spouse is the one who meets the eligibility requirements.
LINE 22. Moving Expense Deduction
Enter the deduction for moving expenses incurred in 2007. Attach a copy of Federal form 3903.
MARRIED SEPARATE FILERS: This deduction must be divided between spouses based on earned income received after their move. If one spouse can show that the move was made for that spouse, that spouse is entitled to the entire deduction.
LINE 23. Iowa Capital Gains Deduction
This is a 100% deduction of qualifying net capital gains realized in 2007. Capital gains from the sales of stocks, bonds, and investment property do not qualify for the capital gain deduction even if sold to lineal descendants of the owners of the property. Non-farm rental property may qualify. Changes to the holding period requirements may be found in the online Expanded Instructions.
MARRIED SEPARATE FILERS: Divide the capital gain deduction based on ownership of the asset.
- Jointly held: divide equally between spouses.
- If other than jointly held: divide between spouses based on percentage of ownership.
LINE 24. Other Adjustments
Enter the total of other allowable adjustments as listed below. Attach an explanation for each adjustment.
- Accrual method
- Alternative motor vehicle deduction of $2,000 for those completing Federal form 8910 (Alternative Motor Vehicle Credit)
- Beneficiaries, exemption of payments to
- Capital gains from installment sales
- Capital or ordinary gain from involuntary conversion related to eminent domain
- Claim of Right deduction may be taken on line 24 or line 66, but not both
- College Savings Iowa, up to $2,595 per beneficiary
- Disability income exclusion, attach IA 2440
- Domestic production activities deduction, see Federal return
- Educator expenses
- Employer Social Security credit from Federal return
- Federal alcohol fuel credit from Federal return
- Film production
- Foreign-earned income exclusion and/or foreign housing deduction from Federal return
- Gains or losses from distressed sale transactions
- Health savings account deduction from Federal return
- Injured veterans program, contributions to (do not put on IA Sch. A)
- Injured veterans program, grants from
- In-home health care
- Military exemptions
- Net operating loss, Iowa
- Organ transplant expenses
- Partnership income and/or S Corporation income: Modifications that decreased the income
- Speculative shell buildings
- Student Loan Interest Deduction from Federal 1040, line 33
- Tuition and fees deduction
- Victim compensation awards
- Vietnam veterans bonus
- Wages paid to certain individuals
- Work Opportunity Credit from Federal return
- Other Federal Adjustments prior to the calculation of Federal 1040 line 38 (Federal AGI) not already taken on the IA 1040
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 tuition and fees deduction, it is prorated based on net income before the adjustment in question.
Line 26 QUALIFICATIONS FOR EXEMPTION FROM TAX
If you qualify for the low income exemption as explained below, enter the words “low income exemption” in the area to the left of your net income figure on line 26. Enter zero on line 57 and complete the remainder of the return.
The following income must be included when determining if you are eligible for the $9,000 exemption or the $13,500 exemption ($18,000 or $24,000 if 65 or older on 12/31/07).
- The incomes of both husband and wife must be combined to determine if you meet this exemption from tax.
- The amount of any pension exclusion that is taken on line 21 of the IA1040.
- Any Social Security Phase-out amount from line 12 of the Social Security worksheet on page 2.
- Any amount of lump-sum distribution separately taxed on Federal form 4972.
- Any net operating loss carryover.
FILING STATUS 1, SINGLE: If you are using filing status 1 (single), you are exempt from Iowa tax if you meet any of the following three conditions:
- Your net income from all sources, line 26, is $9,000 or less and you are not claimed as a dependent on another person’s Iowa return. ($18,000 if you are 65 or older on 12/31/07)
- Your net income from all sources, line 26, is less than $5,000 and you are claimed as a dependent on another person’s Iowa return.
- You were a nonresident or part-year resident and had net income from Iowa sources of less than $1,000. To understand “Iowa-source income,” see the instructions for lines 1-26 of the IA 126. If Iowa tax was withheld, you must complete the IA 1040 and the IA 126 in order to receive a refund of the tax.
ALL OTHER FILING STATUSES: If you are filing jointly, separate on a combined return, head of household, or qualifying widow(er), you are exempt from Iowa tax if you meet either of the following conditions:
- Your net income from all sources, line 26, is $13,500 or less and you are not claimed as a dependent on another person’s Iowa return. ($24,000 if you or your spouse is 65 or older on 12/31/07)
- You were a nonresident or part-year resident and had net income from Iowa sources of less than $1,000. To understand “Iowa-source income,” see the instructions for lines 1-26 of the IA 126, page 8 of this booklet. You must complete the IA 1040 and the IA 126 in order to receive any refund. Illinois residents: See inside front cover, reciprocal agreement.
STEP 6 FEDERAL TAX ADDITION AND DEDUCTION
LINE 27. Federal Income Tax Refund/Overpayment Received in 2007
Any Federal income tax refund received during 2007 must be reported on this line. To find out the amount of your Federal refund, you must contact the IRS at 1-800-829-1040 or www.irs.gov. If you chose to have any part of an overpayment of Federal income tax credited to estimated tax payments for 2007, the amount should be claimed as 2007 estimated tax paid on line 32. The total overpayment must be reported on line 27. Any portion of the Federal refund received due to the motor vehicle fuel tax credit must be reported on the Iowa return.
Do not include the Federal refund in the following situations:
- Do not include any part of the refund received from earned income credit, the additional child tax credit, or the credit for Federal telephone excise tax paid.
- You are filing an Iowa return for 2007 for the first time because you moved into Iowa during the year. A refund of Federal tax received in 2007 is not reported if the tax was not deducted from Iowa income in a prior year.
- The refund you received was from a year in which you did not take a deduction for the payment of Federal tax because your income was less than the minimum amount for paying Iowa tax or your tax for that year was calculated using the alternate tax computation.
- You were a nonresident for the tax year of the refund and were not required to file an Iowa return for that year.
MARRIED SEPARATE FILERS: If the refund received in 2007 was from a jointly-filed Federal return, it must be divided between the spouses in the ratio of the spouses’ Iowa net incomes in the year for which the refund was issued.
LINE 28. Self-employment/Household Employment Taxes
- If any part of the Federal tax payments on lines 31, 32 or 33 include self-employment tax, then the self-employment tax must be added back on line 28.
- If any part of the Federal tax payments on lines 31, 32 or 33 include Federal Household Employment taxes, then Federal Household Employment taxes must be added back on line 28.
MARRIED SEPARATE FILERS: Each spouse must claim his or her own self-employment tax. Household Employment taxes are divided between husband and wife in the ratio of their respective net incomes.
LINE 31. Federal Tax Withheld
Enter the amount listed in the box labeled “Federal income tax withheld” on the W-2 or 1099 form(s) that you received.
MARRIED SEPARATE FILERS: Each spouse may claim only his or her own Federal income tax withheld from wages.
LINE 32. Federal Estimated Tax Payments Made in 2007
Enter the Federal estimated income tax payments made in 2007. Include any credit applied from your 2006 Federal income tax overpayment.
MARRIED SEPARATE FILERS: All Federal estimated tax payments made in 2007 are divided between spouses in the same ratio as their incomes not subject to Federal withholding for the 2007 tax year.
LINE 33. Additional Federal Tax Paid in 2007
- Enter the amount of additional Federal income tax paid during 2007 for tax year 2006 and any other years before 2006. The amount of additional Federal income tax paid is deductible only if Iowa income tax returns were required to be filed for the year for which the additional Federal income tax was paid. Include only the actual Federal tax payments made in 2007, but DO NOT include penalties and interest.
MARRIED SEPARATE FILERS: The additional Federal tax paid must be divided between the spouses in the ratio of the spouses’ Iowa net incomes for the prior years for which they paid additional Federal income tax.
- FICA payments in excess of $6,045.00 for Social Security tax for each person and the motor vehicle fuel tax credit from the 2007 Federal return can be deducted as a Federal tax payment on line 33.
STEP 7 ITEMIZED OR STANDARD DEDUCTION
You may itemize deductions or claim the Iowa standard deduction, whichever is larger. You may itemize deductions on your Iowa return even if you did not itemize deductions on your Federal return.
MARRIED SEPARATE FILERS: If one spouse uses the standard deduction, then both spouses must use the standard deduction, even if separate Iowa returns are filed.
LINE 37. Total Itemized Deduction.
- If itemizing, taxpayers that have Federal Bonus Depreciation on form IA 4562A must complete the Iowa Schedule A rather than using a copy of the Federal Schedule A.
- The itemized deduction for state sales and use tax paid is allowed only if the taxpayer claimed an itemized deduction for state sales and use tax paid on the Federal return.
- Taxpayers with the mortgage interest credit deduction can claim on their Iowa return a deduction on line 9b of Schedule A for all home mortgage interest paid in the tax year and not just the home mortgage interest that was deducted on the Federal Schedule A.
- School Tuition Organization Tax Credit Contributions: Do not include as an itemized deduction any contributions for which a credit is claimed on line 53 of the IA 1040.
- Injured Veterans Grant Program Contributions: These contributions do not qualify as itemized deductions.
- Health Insurance Premiums: Do not include as an itemized deduction any health insurance premiums shown on line 18 of the IA 1040.
- Vehicle Registration Fee Deduction. If you itemize deductions, a portion of the automobile registration fee you paid in 2007 may be deducted as personal property tax on your Iowa Schedule A, line 6, and Federal Schedule A, line 7. This deduction is for registration fees paid based on the value of qualifying automobiles and multipurpose vehicles. Multipurpose vehicles are defined as motor vehicles designed to carry not more than 10 people, and constructed either on a truck chassis or with special features for occasional off-road operation [Iowa Code Section 321.1(44)]. Registration fees on the following vehicles are not deductible: pickups, motor trucks, work vans, ambulances, hearses, non-passenger-carrying vans, campers, motorcycles, or motor bikes. See 2007 Expanded Instructions online.
- Newer Vehicles: Use the following worksheet to calculate the deductible amount of registration fees paid in 2007 for qualifying automobiles (model year 1997 or newer) and multipurpose vehicles (model year 1993 or newer).
Line 37 Vehicle Registration Deduction Worksheet
| 1. Enter the actual registration fee paid................... | 1. ____________ |
| 2. Take the weight of your vehicle and divide it by 250. The weight is found on your registration. ....... | 2. ____________ |
| 3. Subtract line 2 from line 1. This is the deductible amount for line 37. ............................ | 3. ____________ |
Older Vehicles: For qualifying automobiles (model year 1996 or older) and multipurpose vehicles (model year 1992 or older) the deductible amount is 60% of the registration fees paid in 2007.
Iowa Itemized Deduction Worksheet form IA 104 must be used if your Federal AGI is more than $156,400 ($78,200). See online 2007 Expanded Instructions.
LINE 38. Iowa Income Tax if included in line 5 of Federal Schedule
A. If your total itemized deductions on line 37 includes Iowa income tax, enter the amount of Iowa income tax.
MARRIED SEPARATE FILERS: Iowa income tax deduction must be divided between husband and wife in the ratio of their respective net incomes.
LINE 40. Other Deduction
Include the following:
- Expenses Incurred for Care of a Disabled Relative: Expenses, not to exceed $5,000, incurred in caring for a disabled relative in your home may be deducted. The expenses must be for the care of a person who is your grandchild, child, parent, or grandparent. The disabled person must be unable, by reason of physical or mental disability, to live independently and must be receiving or be eligible to receive medical assistance benefits under Title 19 of the U.S. Social Security Act. Only expenses which are not reimbursed can be claimed. An itemized list of expenses must be included with the return. Items may include food, clothing, medical expenses not otherwise deductible, and transportation. The following expenses cannot be included: rent, mortgage payments, interest, utilities, house insurance, and taxes. A statement from a qualified physician certifying that the person with the disability is unable to live independently must be submitted with the return the first year the deduction is taken and every third year thereafter.
MARRIED SEPARATE FILERS: The total deduction claimed by both spouses for each relative with a disability may not exceed $5,000. This deduction must be divided between husband and wife in the ratio of their respective net incomes.
- Adoption Expenses: If you adopted a child during the tax year, you may be eligible to deduct a portion of the adoption expenses you paid in 2007. This deduction is taken in the year you paid the expenses even if the child is not placed in your home that year. Costs relating to the child’s birth, any necessary fees, and all other costs connected with the adoption procedure are allowed. Include a list of expenses with your return. Subtract 3% of your total Iowa net income entered on line 26 from the total of qualifying adoption expense. If married, 3% of the combined net income must be subtracted. Only the amount which exceeds 3% of your total Iowa net income may be deducted.
MARRIED SEPARATE FILERS: This deduction must be divided between husband and wife in the ratio of their respective net incomes.
- Mileage Deduction for Charitable Purposes: Iowa allows you an additional deduction for automobile mileage driven for charitable organizations. Calculate the deduction as follows:
| 1. Number of miles x 34¢/mile ...................................................................... | 1. ______ |
| 2. Less charitable mileage deduction entered on Federal or Iowa Schedule A ..... | 2. ______ |
| 3. Equals additional mileage deduction for charitable purposes. ........................... | 3. ______ |
LINE 41. Itemized or Standard Deduction
Mark the correct box to show the deduction method used.
STANDARD: Tax year 2007, standard deduction is:
Filing Status 1 : $1,700
Filing Status 3 & 4 : $1,700 for each spouse
Filing Status 2, 5 or 6 : $4,200
STEP 8 TAX CALCULATION
LINE 43. Tax from Tables or Alternate Tax
The tax tables begin on page 11 for all filing statuses.
Alternate Tax Calculation: For filing statuses 2, 3, 4, 5, and 6. If the combination of your net income from line 26 PLUS any pension exclusion taken on line 21 and Social Security Phase-out taken on line 12 of the Social Security worksheet on page 2 exceeds $13,500 ($24,000 if you or your spouse is 65 or older on 12/31/07), you may owe less tax by completing the worksheet below to compute your tax liability. Enter this alternate tax on line 43 if it is less than the tax from the tax table. This is not available to status 1 filers.
If you are married filing separately and one spouse has a net operating loss that will be carried back or forward, then you cannot use the alternate tax computation. If the spouse with the net operating loss elects not to carry the net operating loss back or forward, then you can use the alternate tax computation. A statement must be attached to the return saying that the spouse with the net operating loss will not carry it back or forward.
ALTERNATE TAX CALCULATION |
|
| 1. Enter the total of net income from line 26, pension exclusion from line 21 of the IA 1040 and Social Security Phase-out taken on line 12 of the Social Security worksheet on page 2. Filing statuses 3 or 4: Enter combined totals of both spouses | 1. _________ |
| 2. Subtract $13,500 from line 1. ($24,000 if you or your spouse is 65 or older on 12/31/07) | 2. _________ |
| 3. Income subject to alternate tax. | 3. _________ |
| 4. Multiply line 3 by 8.98% (.0898) | 4. _________ |
| 5. Using the tax tables, determine the tax on the taxable income from line 42 of the IA 1040. Status 3 and 4 filers: Calculate tax separately and combine the amounts | 5. _________ |
| 6. Compare the amounts on line 4 and line 5. Enter the smaller amount here and on line 43, IA 1040. | 6. _________ |
MARRIED SEPARATE FILERS (including status 4): Use the combined net incomes of both spouses to compute the alternate tax. (If you are status 4 and do not provide the other spouse’s income in Step 2 of the IA 1040, you will not be allowed the alternate tax calculation.) Divide the alternate tax between spouses in the ratio of the net income of each spouse to the combined net income of both spouses. “Net income” for purposes of this proration is the amount from line 26, plus any pension exclusion from line 21 and Social Security Phase-out taken on line 12 of the Social Security worksheet.
LINE 44. Iowa Lump-sum Tax
Enter 25% of Federal tax from form 4972.
LINE 45. Iowa Minimum Tax
The Iowa minimum tax is imposed, for the most part, on the same tax preference items and adjustments on which Federal minimum tax is imposed. However, you may be subject to Iowa Minimum Tax even if you have no liability for Federal minimum tax. If you had tax preference items and adjustments in 2007, see form IA 6251 for further information.
NONRESIDENTS AND PART-YEAR RESIDENTS: If you have Iowa-source tax preferences or adjustments, you may be subject to Iowa Minimum Tax. See form IA 6251.
LINE 48. Tuition and Textbook Credit
Taxpayers who have one or more dependents attending Kindergarten through 12th grade in an accredited Iowa school may take a credit for each dependent for amounts paid for tuition and textbooks. Dependents must have attended a school in Iowa that is accredited under section 256.11, not operated for a profit and adheres to the provisions of the U.S. Civil Rights Act of 1964. The credit amount is 25% of the first $1,000 paid for each dependent for tuition and textbooks. In the case of divorced or separated parents, only the spouse claiming the dependent can claim the amounts paid by that spouse for tuition and textbooks for that dependent. Expenses for textbooks or other items for home schooling, tutoring, or schooling outside an accredited school do not qualify for the credit. “Tuition” means any charges for the expense of personnel, buildings, equipment and materials other than textbooks, and other expenses that relate to the teaching of only those subjects legally and commonly taught in Iowa’s public elementary and secondary schools. “Textbooks” means books and other instructional materials used in teaching those same subjects. This includes fees, books and materials for extracurricular activities.
Examples of extracurricular activities: sporting events, speech activities, musical or dramatic events, driver’s education (if paid to a school), awards banquets, homecoming, prom (clothing does not qualify), and other school related social events, etc.
For lists of items eligible and not eligible for the credit, see 2007 Expanded Instructions on our Web site.
Calculate the proper amount of expenses per dependent and multiply the amount – not to exceed $1,000 – by 25% (.25).
Example: Students Patty and Mark have qualifying expenses of $1,400 and $700 respectively. Their parents can take a credit of $250 (25% of $1,000 maximum) for Patty and $175 (25% of $700) for Mark, for a total credit of $425. LINE 51. Credit for Nonresident or Part-year Resident. Enter the amount of your nonresident/part-year resident tax credit from Schedule IA 126, line 33. IA 126 instructions begin on page 8. Examples are available in the Expanded Instructions. You may owe less tax by using filing status 3 or 4. A copy of Schedule IA 126 and a copy of your Federal return must be attached.
LINE 53. Other Nonrefundable Iowa Credits
Enter the total of the credits from Part I of the IA 148 Tax Credits Schedule. See the 2007 Expanded Instructions online for the list of credits. You must attach the IA 148 to the IA 1040.
LINE 55. School District Surtax/EMS Surtax
Multiply the amount on line 54 by the surtax rate and enter the result. The applicable school district is the one in which you resided on the last day of the tax year, not necessarily the district where your children attend school. Taxpayers without children, or without children in public school, are still subject to this tax. Surtax rates are listed on pages 16-17. The name of your school district may be found on your voter registration card.
LINE 58. Contributions
Enter your voluntary contributions to any of the “checkoffs” in boxes 58a, 58b, 58c, and 58d. Please note that you may contribute to any of the checkoffs regardless of whether you are entitled to a refund or owe additional taxes, but your contribution will reduce your refund or add to the amount you owe. Your contribution this year will qualify as a charitable contribution on next year’s return if the return is filed during the calendar year. If you file an amended return, you cannot change your contribution.
MARRIED SEPARATE FILERS: Married couples filing separately on a combined return (filing status 3) must enter their combined checkoff amounts in the appropriate box(es) if both choose to contribute.
STEP 9 CREDITS
LINE 60. Iowa Income Tax Withheld
Enter the total amount of income tax withheld for Iowa on your W-2s, W-2Gs, and/or 1099s.
LINE 61. Estimated and Voucher Payments
Enter the total amount of 2007 Iowa estimated tax payments. This includes any fourth quarter payment made in January 2008 and any payments made with the
IA 1040-V Payment Voucher for 2007. Also include any overpayment from your 2006 income tax return that you applied to your estimated tax for 2007.
LINE 62. Out-of-state Tax Credit
All income an Iowa resident earns is taxable to Iowa to the same extent that it is taxable on the Federal return even if the income was earned in another state or foreign country. If another state or foreign country taxes that same income, then the Iowa resident may be able to claim the Out-Of-State Tax Credit by completing the IA 130 form. See examples on page 10.
LINE 63. Motor Fuel Tax Credit
Enter the amount of Motor Fuel Tax Credit from Schedule IA 4136. The Federal Schedule 4136 cannot be used. The Iowa credit does not apply to fuel used in on-road vehicles or pleasure boats. If you have an Iowa Motor Fuel Tax Refund Permit Number and have claimed any refunds during the tax year, do not claim any credit on this line.
LINE 64. Child and Dependent Care Credit OR Early Childhood Development Tax Credit. Only one of these credits may be taken.
Only taxpayers with a net income of less than $45,000 are eligible to take one of these credits. If you are married, your net income and the net income of your spouse must be combined to determine if you qualify, even if your spouse does not file an Iowa return.
If you are choosing the Child and Dependent Care Credit, use the following worksheet to calculate the credit.
ALTERNATE TAX CALCULATION |
|
| 1. Enter the amount from line 9 of Federal form 2441 or line 9 of Schedule 2 of Federal form 1040A. Note: Use the Child Care Credit prior to any Federal Alternative Minimum Tax calculation. | 1. _________ |
2. If total of line 26 of the IA 1040, columns A and B, is: |
2. _________ |
| 3. Multiply line 1 by percentage on line 2. Enter the result here and on line 64 of the IA 1040. | 3. _________ |
NONRESIDENTS AND PART-YEAR RESIDENTS - The Child and Dependent Care Credit must be adjusted using the following formula:
Iowa net income (line 26, IA 126) All-source net income of you and spouse (line 26, IA 1040) |
x Credit Calculated above |
= Credit on line 64 |
If you are choosing the Early Childhood Development Tax Credit, you may take the credit equal to 25% of the first $1,000 of qualifying expenses paid in 2007 for each dependent from the ages of three through five.
Expenses that qualify include the following:
- Services provided by a preschool, as defined in Code section 237A.1
- Books that improve child development, such as textbooks, music and art books, teacher’s editions and reading books
- Instructional materials required to be used in a lesson activity, such as paper, notebooks, pencils and art supplies
- Lesson plans and curricula
- Child development and educational activities outside the home, such as drama, art, music and museum activities and the entrance fees for such activities
Early childhood development expenses that do not qualify include:
- Food, lodging, or membership fees relating to child development and educational activities outside the home
- Services, materials, or activities for the teaching of religious tenets, doctrines, or worship, if the purpose of these expenses is to instill those tenents, doctrines or worship
MARRIED SEPARATE FILERS: In computing the credit, the combined net income of both spouses must be used. The credit must be divided between husband and wife in the ratio of each spouse’s net income to their combined net income.
LINE 65. Iowa Earned Income Credit
Enter 7.0% (0.07) of the Federal Earned Income Credit claimed on your Federal return. The Iowa Earned Income Credit is now a refundable credit to the extent it exceeds your calculated tax.
NONRESIDENTS AND PART-YEAR RESIDENTS: The Iowa Earned Income Credit must be adjusted using the following formula:
Iowa net income (line 26, IA 126) All-source net income of you and spouse (line 26, IA 1040) |
x Iowa Earned Income Credit |
= Credit on line 65 |
MARRIED SEPARATE FILERS: The Iowa Earned Income Credit must be divided between husband and wife in the ratio of each spouse’s earned income to the total earned income of both spouses. Earned income includes wages, salaries, tips or other compensation and net earnings from self-employment.
LINE 66. Other Refundable Credits
Enter the total of other credits from Part II of the IA 148 Tax Credits Schedule. See the 2007 Expanded Instructions online for the list of credits. You must attach the IA 148 to the IA 1040.
STEP 10 REFUND OR AMOUNT YOU OWE
LINE 73. Penalty for Underpayment of Estimated Tax
If you are required to make estimated tax payments but fail to make the payments, you are subject to a penalty in addition to any tax you may owe. The penalty is determined in the same way as for Federal purposes. Consequently, you must include your Iowa income, lump-sum, and minimum taxes when calculating the penalty for underpayment of estimated tax. If you are subject to this penalty, complete IA 2210 (IA 2210F for farmers and fishers) and enter the penalty on this line. Attach a copy of the IA 2210 or IA 2210F to your return. If you choose to use the annualized method of computing the penalty, attach a copy of your worksheet to your tax return. If you are due a refund, subtract the penalty amount from the overpayment you show on line 70 or line 71.
STEP 11: POLITICAL CHECKOFF
Contributions to this checkoff do not reduce your refund or increase your amount due. Contributing to this checkoff is not required. You may assign $1.50 to a specific political party or to the Iowa Election Campaign Fund for distribution to qualifying parties. A husband and wife may each assign $1.50 to the party of his or her choice regardless of the filing status of the return.
STEP 13: COW/CALF REFUND
Form IA 132 and Expanded Instructions are on our Web site.
LINE 74. Penalty and Interest
74a. 10% Penalty for Failure to Timely File a Return: If you do not file your return by the due date and at least 90% of the correct tax is not paid, you owe an additional 10% of the unpaid tax.
5% Penalty for Failure to Timely Pay the Tax Due: If you file your return on time but do not pay at least 90% of the correct tax due, you owe an additional 5% of the unpaid tax.
74b. Interest must be added to delinquent tax. Interest is added at a rate of 0.8% per month beginning on the day after the due date of the return and accrues each month until paid in full.
LINE 75. You have three paperless options to pay the amount due. See the back cover of this booklet
You may also mail a check or money order with an IA 1040-V Payment Voucher payable to: Treasurer, State of Iowa. Write your Social Security Number on the check or money order. Do not send in any payment of less than one dollar.
STEP 14: SIGNATURE
Returns are not processed and refunds are not issued if returns are not signed. If you and your spouse file a joint or combined return, both of you must sign. Deceased Taxpayer: If your spouse died and you are filing a joint or combined return, write on the deceased’s signature line “Filing as a surviving spouse” and the date of death. Also, attach any forms required to be filed with your Federal return, such as Federal form 1310 or a copy of the court certificate showing your appointment as a personal representative of the decedent.
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