According to the Iowa Department of Revenue, Active Duty Military pay is not taxable on the Iowa return. However, the income does need to be reported on the return.
If you are a resident of Iowa, you can deduct the active duty military pay from the return by performing the following steps in the program:
- State Section
- Iowa Resident Return
- Subtractions From Income
- Enter the amount under "Active Duty Military Pay"
- Continue
If you are a nonresident of Iowa, stationed in Iowa, you can deduct the active duty military pay by completing the following steps in the program:
- State Section
- Nonresident Iowa Return
- Subtractions From Income
- Enter the amount under "Active Duty Military Pay"
- Continue
Suppose one spouse is a resident of Iowa and the other is not. In that case, you can file the Iowa return using the Married Filing Joint, Married Filing Separately on a Combined return, or Married Filing Separate on a separate return status.
Military Retirement Benefits:
Beginning in 2014, Military Retirement benefits can be excluded from Iowa Individual Income tax returns. To claim the military retirement deduction, perform the following steps in the program:
- State Section
- Iowa Return
- Subtractions from Income
- Military Retirement Pay Included on Your Federal Return
- Save
Exclusion of Distributions from Retirement Plans by National Guard members and members of military reserve forces of the United States:
Suppose a National Guard or reserve member is called to active state or federal duty and withdraws money from a qualified retirement account. In that case, the withdrawal is not taxable in Iowa and is not subject to any state tax penalty.
If the income is included on line 9 of the Iowa return, deduct it in the program by performing the following steps:
- State Section
- Iowa Return
- Subtractions From Income
- Other Subtractions from Federal Taxable Income
- Amount - enter funds withdrawn
- Adjustment Type
- Military Exemptions - from drop-down menu
- Save