Iowa Response – State Conformity With Federal Changes

At this time Iowa conforms to the Internal Revenue Code as it existed on January 1, 2015. Absent some action by the Iowa legislature, Iowa will not conform with any changes made by the Tax Cuts and Jobs Act or any other change made to the Internal Revenue Code after January 1, 2015, except for a few specific provisions of the 2015 PATH Act, with which the Iowa legislature elected to conform last year. The Iowa Legislature is currently in session.

Disaster Tax Relief: For Iowa purposes the items listed in this category will not be subject to any special treatment, they will be reported in the same manner as any other casualty loss, retirement plan distribution, or charitable contribution (as applicable). Casualty losses and charitable contributions are reported on the IA 1040 Schedule A. Retirement plan distributions are reported on the IA 1040 to the extent they are includable in Iowa net income in the tax year in which the distribution was made.

Medical Expense Deduction: The threshold is still 10% for Iowa purposes. The correct Iowa threshold should already be accounted for on the IA 1040 Schedule A.

Bonus Depreciation: Iowa specifically decouples from the bonus depreciation allowed under section 168(k) of the Internal Revenue Code, even as it existed prior to the Tax Cuts and Jobs Act. Property eligible for federal bonus depreciation must be depreciated using MACRS, without regard to the additional first year depreciation allowance under section 168(k) for Iowa purposes. These adjustments are shown on the IA 4562A&B.

 

Iowa will not conform with any of the extenders listed below for tax year 2017, or any future year, unless the legislature acts to do so. Iowa also did not conform with any of the three extenders listed for tax year 2016, and the department already has some guidance on the effects of non-conformity with these specific provisions available on our website.

Sec. 40201.  Extension of exclusion from gross income of discharge of qualified principal residence indebtedness.

Sec. 40202.  Extension of mortgage insurance premiums treated as qualified residence interest.

Sec. 40203.  Extension of above-the-line deduction for qualified tuition and related expenses.