Iowa Tax Form IA-6251 - Minimum Tax Computation Instructions

INSTRUCTIONS FOR IA 6251

WHO MUST FILE IA 6251

All individuals, estates and trusts that had one or more of the adjustments or preferences in Part I must complete form IA 6251 to see if they owe Iowa minimum tax. Taxpayers may have an Iowa minimum tax liability even if they owed no Federal minimum tax. All taxpayers with a tax preference item or adjustment are to attach this form to their IA 1040, even if there is no Iowa minimum tax. Nonresidents who have a liability for Iowa minimum tax are required to file an Iowa return even if they have no regular Iowa income tax liability.

Married filing separate filers: Each spouse having tax preferences and adjustments needs to complete an IA 6251.

PART I: ADJUSTMENTS AND PREFERENCES

If you did not itemize on the Federal level, lines 1-6 of the IA 6251 will refer to the Iowa Schedule A.

Note: The Federal tax preferences for percentage depletion of an oil, gas or geothermal well and intangible drilling costs from lines 9 and 25 of Federal form 6251 are not tax preferences but are additions to income on line 14 of IA 1040.

RELATED ADJUSTMENTS

Line 12-m

Include related adjustments from line 26 of the Federal 6251 only to the extent the adjustments are ones that affect the computation of net income. An adjustment related to tax-exempt interest from private activity bonds would not be included, since this is not an Iowa tax preference or adjustment.

FEDERAL PHASE-OUT OF ITEMIZED DEDUCTIONS

Line 16

If you are subject to the Federal phase-out of itemized deductions on your Federal Schedule A, you must enter the revised Iowa phase-out amount on this line. To determine this amount, first complete the IA form 41-104, Itemized Deduction Worksheet, found at www.state.ia.us/tax. Then complete the following:

ALTERNATIVE NET OPERATING LOSS DEDUCTION

Line 19

A net operating loss can be carried back or carried forward to reduce a taxpayer’s alternative minimum taxable income. However, before the net operating loss can be deducted it must be reduced by any adjustments and tax preferences used in computing the net operating loss. A net operating loss that is carried to the current tax year on line 19 cannot exceed 90 percent of the amount on line 18. Any portion of the net operating loss which cannot be used can be carried over to the next tax year.

Line 28

Enter the amount from IA 1040, line 43, less line 49; or enter the amount from IA 1041, line 23, less line 27. If less than zero, enter zero.

NONRESIDENTS AND PART-YEAR RESIDENTS

Nonresidents and part-year residents of Iowa are required to pay Iowa minimum tax only on the percentage of adjustments and tax preferences which are Iowa source. Lines 30-33 in Part IV must be completed to calculate the Iowa minimum tax liability for nonresidents and part-year residents only if one has Iowa source adjustments or preferences.

Line 30

Add Iowa net income (line 26, IA 126) plus the total of those adjustments and tax preferences on line 13 of the IA 6251 which are from Iowa sources.

Line 31

Add total net income (line 27, IA 126) plus the total of all adjustments and tax preferences on line 13 of the IA 6251.

Line 32

Divide line 30 by line 31 and enter the result to three decimal places (Example: .786).

Line 33

Multiply line 29 by line 32. The result is the Iowa minimum tax and is to be entered on line 45, IA 1040 (line 25, IA 1041). See the instructions below relating to minimum tax limited to net worth.

MINIMUM TAX LIMITED TO NET WORTH

Taxpayers who meet all qualifications for a distressed sale, but have a debt to asset ratio of 75 percent or less, are not subject to the minimum tax in an amount greater than the taxpayer’s net worth. In situations where a taxpayer has multiple transactions (forfeitures, transfers, sales or exchanges), minimum tax is limited to net worth prior to the last transaction in the tax year. For additional information on what constitutes a “distressed sale” contact the Taxpayer Services Section. If calling from the Des Moines area or from out of state, call (515) 281-3114. Elsewhere in Iowa or from the Rock Island/ Moline or Omaha calling areas, call 1-800-367-3388 (toll free). E-mail: idr@iowa.gov

ALTERNATIVE MINIMUM TAX CARRYFORWARD CREDIT

An alternative minimum tax credit is available which may reduce the regular tax of an individual for minimum tax paid in a prior year on deferral items of tax preference. The Iowa credit is computed similarly to the Federal credit but on form IA 8801. The IA 8801 and the IA 148 Tax Credits Schedule must be attached to the IA 1040 if this credit is claimed.