The state of Iowa has made significant tax law changes for tax year 2024. The starting point for taxation on your Iowa return is now federal taxable income.
Federal Alignment
- Iowa will no longer have its own standard or itemized deductions, incorporating the federal standard or itemized deduction instead.
- All taxpayers must now use the same filing status on their Iowa return as their federal return.
- Married taxpayers no longer have the option to file separately on a combined return.
Tax Brackets
- The tax rates for each tax bracket have decreased. For tax year 2024, Iowa will have a single tax rate of 3.8%.
- This reduction is part of a phased plan, with Iowa aiming for a single tax rate of 3.9% by 2026.
Deductions/Credits
- Retirement Income Exclusion: The retirement income exclusion will now include all qualifying pension and retirement income for qualifying taxpayers.
- Surviving Spouse Pension Income Exemption: For tax years beginning on or after January 1, 2024, a surviving spouse may exclude amounts received from a deceased spouse’s pension on Schedule 1, line 7, regardless if the deceased spouse was 55 years of age or older or disabled. If the pension was from employment in a protection occupation, or as a sheriff, deputy sheriff, firefighter, or police officer.
- 529 Plans: For tax year 2024 the deduction limit for contributions to an Iowa 529 plans has increased to $5,500 per beneficiary. The deduction is reported on Schedule 1, line 19, using code ”g”. Taxpayers who make a qualifying transfer from an Iowa 529 plan to a Roth IRA on or after January 1, 2024 are no longer required to add-back the amount previously deducted.
- Capital Gain Deductions: For tax years beginning on or after January 1, 2023, taxpayers are allowed to exclude gains from qualifying livestock sales in addition to qualifying pre-tax year 2023 installments sales. The IA 100A should only be used for installment sales occurring before January 1, 2023 and for sales occurring after January 1, 2023 that are not claimed under the single lifetime election for retired farmers and surviving spouses.
- Partnership and/or S corporation Modifications: Beginning in tax year 2024 any partnership and/or S corporation modifications should be reported on Schedule 1, line 3
- Military retirement income: Beginning in tax year 2024 the military retirement income exclusion should be reported on Schedule 1, line 4.
- Public Safety Officer Moving Expense Tax Credit: There is a new Public Safety Officer Moving Expense Tax Credit available to certain individuals who become residents of Iowa after July 1, 2024 upon taking full-time employment as a public safety officer in Iowa. This credit is for unreimbursed moving expenses incurred by the taxpayer up to $2,000. The credit is refundable and applies to tax years beginning on or after January 1, 2024. The credit can be claimed on IA 176 and reported on the IA 148, both of which should be included with the IA 1040.
Further Information
For more information regarding the changes made by Iowa, please see Iowa's 2024 filing Instructions.