The state of Iowa has made the following tax law changes for tax year 2021:
- For tax years beginning on or after 2020, Iowa will automatically conform to changes made to the IRC, except as stated by Iowa law.
- Economic Impact Payments (EIP) if a rebate or a refundable tax credit won't be added to your Iowa taxable income even as part of your federal refund.
- Paycheck Protection Program (PPP) loans forgiven and excluded from income for federal purposes will also be allowed to be excluded from Iowa income.
- Federal bonus depreciation provisions, Iowa will conform with for assets placed in service in tax year 2021.
- Educators are now entitled to deduct certain out of pocket expenses in excess to the federal deduction limitation but cannot exceed $500 per eligible educator.
- Qualified Business Income Deduction has increased from 25% to 50% of the federal deduction.
- Domestic Production Activities Deduction (DPAD) increased from 25% to 50% of the federal deduction.
- Tuition and Textbook Tax Credit increased to 25% of the first $2,000 paid for tuition and textbook for each dependent.
- Volunteer Firefighter/EMS/Reserve Peace Officer Tax Credit has increased from $100 to $250.
- Geothermal heat pump tax credit may be available for installations completed in 2021. It cannot exceed $1,000,000 per year. Application deadline for 2021 installations due May 1, 2022.
- Child and Dependent Care Credit or Early Childhood Development income threshold has increased from $45,000 to $90,000.
- New Form- If amending your IA 1040 you must now attach the IA 102.