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Will Iowa re-couple with federal deductions?

January 25, 2010

The article says the issue of linking Iowa's income tax rules to the latest federal legislation is "complicated," but it's really pretty simple:

“We’re going through some really tough decisions in state government and additional things that cost big piles of money aren’t likely to happen,” said Senate Majority Leader Mike Gronstal, D-Council Bluffs.

In other words, the legislature is loath to give up any of your money, and it's just tough that it makes a mess of your tax return.

This year the Department of Revenue telling taxpayers to assume that Iowa won't couple to federal changes. Last year the Department made the mistake of assuming the Legislature would get it together, causing many taxpayers to file botched returns.

Some of the provisions that will require different numbers on federal and Iowa returns, absent coupling legislation:

- Bonus depreciation is not allowed for Iowa.
- The Iowa Section 179 deduction will be limited to $133,000; the federal limit is $250,000.
- Iowa won't allow the $250 "educator" deduction.
- College tuition deductions won't be available on the Iowa return.
- The optional sales tax deduction will not be available on Iowa returns.

The newly-enacted retroactive 2009 deduction for contributions made in 2010 for Haiti disaster relief will also be unavailable in Iowa unless the legislature acts.

Prediction: Iowa will at most couple with a few of the little items -- maybe including Haiti relief -- and none of the big ones, like depreciation or Section 179.

Tags: Depreciation.Iowa.Iowa tax policy.Rod Boshart.Section 179.

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