Tax Tip Tuesday: Coupling Iowa Tax Law

January 31, 2017

 

This week we will look at a major issue which impacts some Iowa tax returns for 2016.

 

Every year the Iowa legislature has to pass a bill to couple (conform) Iowa tax law to federal tax law.  Last year, the Iowa legislature passed the coupling bill on March 15th, but unfortunately, they only coupled for 2015 tax returns on all items with the exception of bonus depreciation.

 

The Iowa legislature this year has indicated that they do not plan to couple with any federal tax law changes for 2016. 

 

For 2016, for federal purposes, businesses can immediately deduct up to $500,000 of the tax basis of certain business property or equipment placed into service that year rather than depreciating that equipment over a period of years. Once qualifying purchases reach a threshold of $2,010,000, the amount of the deduction is reduced, dollar-for-dollar for each dollar above the threshold.

 

For 2016, the Iowa Section 179 deduction is back to $25,000 with a $200,000 threshold.  Also as in prior years, Iowa does not allow bonus depreciation. 

 

If the Iowa legislature does not couple with federal law for 2016, then the following deductions will not be available:

 

  • The $250 above-the-line deduction for teachers who purchase supplies for their K-12 classrooms

  • An option for taxpayers ages 70.5 years and older to make tax-free distributions from their IRAs to a qualified charity

  • A qualified tuition and fees deduction for higher education

  • An election to deduct state sales/use tax as an itemized deduction instead of state income tax

  • Allowing a deduction for private mortgage insurance premiums

 

It is not too late to contact your state legislator and ask them to reconsider their position on this lack of conformity with federal law.

 

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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March 5, 2019

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