As I mentioned two weeks ago, the Iowa Legislature passed a significant Iowa tax reform bill. We are still waiting for it to be signed by the Governor. This week, we will begin taking a look at some of the contents of the bill.
The individual income tax, currently a nine-bracket tax with a top marginal rate of 8.98 percent, will be converted, in two steps, to a four-bracket tax with a top rate of 6.5 percent. A modest across-the-board rate reduction will be implemented in 2019, reducing the top marginal rate from 8.98 to 8.53 percent. For 2018, the Section 179 small business expensing limit will be increased from $25,000 to $70,000, upped to $100,000 in 2019.
In 2023, subject to various revenue triggers, brackets will be consolidated and larger rate reductions implemented, lowering the top rate to 6.5 percent. Federal deductibility, under which federal tax payments can be deducted from Iowa taxable income, will also be repealed.
Due to the Memorial Day holiday, we will be taking a break. Next edition will be on Tuesday, June 5th. We will look at some provisions that will be effective with the filing of 2018 individual income tax returns.
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 advice 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.