Deductions may be itemized on the Iowa return to the same
extent that they are allowable on the federal return with the following
exceptions:
(1) To the extent that
Iowa income taxes were included in itemized deductions allowable for federal
income tax purposes, they must be subtracted from the itemized deductions to be
deducted on the Iowa return.
(2)
For the tax years beginning on or after January 1, 2004, and before January 1,
2008, and for tax years beginning on or after January 1, 2010, but before
January 1, 2014, the itemized deduction for state sales and use taxes is
allowed on the Iowa return only if the taxpayer elected to deduct state sales
and use taxes as an itemized deduction in lieu of the deduction for state
income taxes on the federal return under Section
164 of the Internal Revenue Code.
If the taxpayer elected to deduct state income taxes as an
itemized deduction on the federal return, taxpayer cannot claim an itemized
deduction for state sales and use taxes on the Iowa return. In addition, if
taxpayer claimed the standard deduction in accordance with Section
63 of the Internal Revenue Code on the
federal return, taxpayer cannot claim an itemized deduction for state sales and
use taxes on the Iowa return.
If the taxpayer is allowed to deduct state sales and use
taxes as an itemized deduction on the Iowa return, taxpayer cannot claim an
itemized deduction on the Iowa return for either the school district surtax
imposed under Iowa Code section
257.21 or the emergency medical
services income surtax imposed under Iowa Code chapter 422D.
(3) Adoption expense deduction. Unreimbursed
amounts paid by the taxpayer in the adoption of a child if placed by an
adoption service provider under Iowa Code chapter 600, which exceed 3 percent
of the taxpayer's net income, or the combined net income of a husband and wife
in the case of married taxpayers filing a joint return, will be allowed as a
deduction in the year paid. Qualifying expenses include all medical, hospital,
legal fees, welfare agency fees, and all other costs relating to the adoption
of a child. Those expenses claimed for adoption purposes may not be claimed
elsewhere on the individual income tax return for tax years beginning before
January 1, 2014. For tax years beginning on or after January 1, 2014, an
adoption tax credit equal to certain qualified adoption expenses can be claimed
in accordance with rule
701-304.52 (422), but the
expenses claimed for the credit cannot be allowed as a deduction under this
subrule.
EXAMPLE: The Joneses, a married couple whose combined net
income for 2014 is $100,000, incur $6,000 of qualified adoption expenses and
claim a $2,500 adoption tax credit in accordance with rule
701-304.52 (422). The amount of
expenses in excess of 3 percent of their combined net income is $3,000. Since
the taxpayers claimed a $2,500 adoption tax credit, only $500 of expenses is
eligible for the deduction.
(4) Deduction for expenses for the care of
certain disabled relatives.
a. For tax years
beginning on or after January 1, 1983, a deduction from net income may be taken
for expenses incurred by a taxpayer for care of a disabled person who is unable
to live independently. Such care must be provided in the home in which the
taxpayer resides throughout the year. A person is considered to be incapable of
living independently if as a result of a physical or mental defect the person
is incapable of caring for the person's hygienical or nutritional needs or
requires the full-time attention of another person for personal safety or the
safety of others. The fact that an individual, by reason of a physical or
mental defect, is unable to engage in any substantial gainful activity, or is
unable to perform the normal household functions of a homemaker or to care for
minor children, does not of itself establish that the individual is physically
or mentally incapable of self-care. An individual who is physically handicapped
or is mentally defective, and for such reason requires the constant attention
of another person, is considered to be physically or mentally incapable of
self-care.
To qualify for the deduction, in addition to being disabled,
the person must be the grandchild, child, parent or grandparent of the taxpayer
or the taxpayer's spouse, and
(1) Be
receiving medical assistance benefits under Iowa Code chapter 249A;
or
(2) Be eligible to receive such
benefits under the income and resource levels established in Iowa Code chapter
239B; or
(3) Would be eligible to
receive such benefits if living in a health-care facility licensed under Iowa
Code chapter 135C.
Expenses incurred for a taxpayer's disabled spouse do not
qualify for the deduction.
b. The deductible amount is limited to $5,000
for each disabled person cared for in the taxpayer's home and the expenses must
not be otherwise deductible as a deduction from net income under Iowa Code
section 422.9.
c. Qualifying expenses include a
proportionate share of food expenses as well as amounts spent directly on the
disabled person for such items as clothing, medical care, dental care and
transportation.
Medical expenses incurred for a disabled relative, which are
eliminated from federal itemized deductions because of the federal adjusted
gross income percentage limitation, may be included in the deduction for
expenses incurred for the care of the disabled relative providing the other
requirements are met. Following are examples to illustrate the portion of
medical expenses incurred which would be deductible.
EXAMPLE 1. Mr. and Mrs. Smith care for Mrs. Smith's mother in
their home. Mrs. Smith's mother is physically unable to live independently and
qualifies for medical assistance benefits under Iowa Code chapter 249A. Mr. and
Mrs. Smith paid medical expenses of $1,500 for themselves and $500 for Mrs.
Smith's mother. The medical expenses for Mrs. Smith's mother are includable as
federal itemized deductions. Mr. and Mrs. Smith's federal adjusted gross income
is $20,000. For 1983, the federal deduction for medical expenses would be
$1,000 ($2,000 minus 5 percent of $20,000 or $1,000). Since the deductible
amount for federal tax purposes is $1,000 or 50 percent of the total medical
expenses of Mr. and Mrs. Smith and Mrs. Smith's mother, there remains 50
percent of the $500 expense for Mrs. Smith's mother (or $250) which can be
included in the Iowa deduction for a disabled relative.
EXAMPLE 2. Mr. and Mrs. Smith's medical expenses were $400
and Mrs. Smith's mother's expenses were $200. None of the $600 in expenses
would be deductible as a federal itemized deduction but the mother's $200 in
expenses would be includable in the Iowa deduction for expenses incurred for a
disabled relative.
d.
Expenses not directly related to care of a disabled relative are not
deductible. This category includes rent, mortgage interest, utilities, house
insurance and taxes. Such expenses would be incurred without the disabled
relative in the home and unless an expense can be directly attributed to the
disabled relative, it may not be deducted.
e. In the event that the person being cared
for is receiving assistance benefits under Iowa Code chapter 239B, the expenses
qualifying for deduction shall be the net difference between the expenses
actually incurred in caring for the person which are not otherwise deductible
as a deduction to net income and the assistance benefits under Iowa Code
chapter 239B. Iowa Code chapter 239B covers family investment program
payments.
f. In order to claim a
deduction for expenses for care of a disabled relative, a schedule of
qualifying expenses must be provided with the tax return as well as a statement
from a qualified physician certifying that the disabled individual is unable to
live independently. Such certification must be filed with the tax return in the
initial year for the deduction and every third year thereafter.
(5) and (6) Reserved.
(7) Deduction of multipurpose vehicle
registration fee. For tax years beginning on or after January 1, 1992, and
before January 1, 2005, individuals who itemize deductions for Iowa income tax
purposes may claim a deduction for 60 percent of the amount of the registration
fee paid for a multipurpose vehicle under Iowa Code section
321.124, subsection 3, paragraph
"h." "Multipurpose vehicle" means a motor vehicle designed to
carry not more than ten people and constructed either on a truck chassis or
with special features for occasional off-road operation. The registration
certificate for a multipurpose vehicle has the letters "MV" printed next to the
word "style" on the certificate.
This subrule applies only to model year 1992 and older model
year multipurpose vehicles. The registration fees for multipurpose vehicles for
the 1993 model year and for model years after 1993 are the same as for other
motor vehicles where the fees for newer model year vehicles are based on the
value and weight of the vehicle. In order to qualify for this deduction, no
part of the multipurpose vehicle registration fee may have been deducted as an
itemized deduction under Section
164 of the Internal Revenue Code or as an
ordinary and necessary business expense.
See also subrule 303.5(9), which provides for the deduction
for registration fees for older motor vehicles. Subrule 303.5(7) also applies
to multipurpose vehicles to the extent those vehicles are for the 1993 model
year or for model years after 1993.
For tax years beginning on or after January 1, 2005, the
itemized deduction for Iowa income tax for multipurpose vehicle registration
fees is the same as allowed under Section
164 of the Internal Revenue Code for federal
tax purposes.
(8) Medical
expense deduction limitation. For tax years beginning on or after January 1,
1996, to the extent that a taxpayer has a medical care expense deduction on the
federal return under Section
213 of the Internal
Revenue Code, the taxpayer must compute the medical care expense deduction on
the Iowa return by excluding those health insurance premiums deducted in
computing net income in accordance with Iowa Code subsection
422.7(29) and
rule
701-302.48 (422).
(9) Deduction of older motor vehicle
registration fee. For tax years beginning on or after January 1, 2002, and
before January 1, 2005, individuals who itemize deductions for Iowa income tax
purposes may claim a deduction for 60 percent of the annual registration fee
paid for certain older motor vehicles. This deduction applies to a 1994 model
year vehicle or a newer model year vehicle that is nine model years old or
older. This deduction also applies to a 1993 or older motor vehicle which has
been transferred to a new owner or to a 1993 or older model vehicle that was
brought into Iowa on or after January 1, 2002. However, the deduction otherwise
allowed pursuant to this subrule is not allowed to the extent that the vehicle
was used in the taxpayer's trade or business so that the deduction for the
registration of the vehicle has already been allowed in the computation of Iowa
net income.
For tax years beginning on or after January 1, 2005, the
itemized deduction for Iowa income tax for older motor vehicle registration
fees is the same as allowed under Section
164 of the Internal Revenue Code for federal
tax purposes.
(10)
Additional first-year depreciation allowance. For tax periods ending on or
after September 10, 2001, any federal itemized deductions that are determined
based on a percentage of a taxpayer's federal adjusted gross income may have to
be adjusted for Iowa tax purposes. These itemized deductions for Iowa
individual tax purposes are based on federal adjusted gross income as adjusted
by the disallowance of the additional first-year depreciation allowance
authorized in Section
168(k)
of the Internal Revenue Code as described in rule
701-302.60 (422).
EXAMPLE: Mr. and Mrs. Jones reported $50,000 in federal
adjusted gross income on their 2002 federal income tax return. Mr. and Mrs.
Jones paid medical expenses of $5,000 for 2002, but could only claim an
itemized deduction for medical expenses for federal tax purposes equal to
$1,250, or to the extent the medical expenses exceeded 7.5 percent of their
federal adjusted gross income ($50,000 times 7.5% = $3,750. $5,000 - $3,750 =
$1,250). Mr. and Mrs. Jones reported a $5,000 increase in Iowa adjusted gross
income due to the disallowance of additional first-year depreciation on their
Iowa return for 2002. Mr. and Mrs. Jones can claim an itemized deduction on the
2002 Iowa return for medical expenses of $875, or to the extent the medical
expenses exceeded 7.5 percent of their adjusted gross income for Iowa purposes
of $55,000 ($55,000 times 7.5% = $4,125. $5,000 - $4,125 =
$875).
(11) Charitable
contributions made in January 2005 for relief of victims of the Indian Ocean
tsunami. For cash contributions made after December 31, 2004, and before
February 1, 2005, to charitable organizations for the purpose of helping
victims of the Indian Ocean tsunami, the taxpayer may claim this contribution
as an itemized deduction on the 2004 Iowa income tax return if the taxpayer
elected to claim this contribution as an itemized deduction on the 2004 federal
tax return. If the taxpayer elected to claim the cash contribution made in
January 2005 as an itemized deduction on the 2005 federal tax return, then it
must be claimed as an itemized deduction on the 2005 Iowa return.
(12) Medical expense deduction for certain
unreimbursed expenses relating to a human organ transplant. For tax years
beginning on or after January 1, 2005, a taxpayer who claims a deduction for
unreimbursed travel and lodging expenses relating to a human organ transplant
in accordance with rule
701-302.66 (422) cannot claim an
itemized deduction for medical expenses under Section
213(d) of the Internal
Revenue Code for these same expenses for Iowa tax purposes.
(13) Charitable contributions relating to the
injured veterans grant program. For tax years beginning on or after January 1,
2006, a taxpayer who claims a deduction for contributions to the injured
veterans grant program in accordance with 701-subrule 302.68(2) cannot claim an
itemized deduction for charitable contributions under Section
170 of the Internal Revenue Code for the
same contribution for Iowa tax purposes.
(14) Charitable contributions relating to
school tuition organizations. For tax years beginning on or after January 1,
2006, a taxpayer who claims a school tuition organization tax credit in
accordance with rule
701-304.32 (422) cannot claim an
itemized deduction for charitable contributions under Section
170 of the Internal Revenue Code for the
amount of the contribution to the school tuition organization for Iowa tax
purposes.
(15) Charitable
contributions relating to the charitable conservation contribution tax credit.
For tax years beginning on or after January 1, 2008, a taxpayer who claims a
charitable conservation contribution tax credit in accordance with rule
701-304.40 (422) cannot claim an
itemized deduction for charitable contributions for the amount of the
contribution for which the tax credit is claimed. See 701-subrule 304.40(4) for
examples illustrating how this subrule is applied.
(16) Charitable contributions relating to the
endow Iowa tax credit. For tax years beginning on or after January 1, 2010, a
taxpayer who claims an endow Iowa tax credit in accordance with rule
701-304.24 (15I,422) cannot
claim an itemized deduction for charitable contributions under Section
170 of the Internal Revenue Code for the
amount of the contribution for which the tax credit is claimed for Iowa tax
purposes.
(17) Charitable
contributions relating to the from farm to food donation tax credit. For tax
years beginning on or after January 1, 2014, a taxpayer who claims a from farm
to food donation tax credit in accordance with rule
701-304.51 (422,85GA,SF452)
cannot claim an itemized deduction for charitable contributions under Section
170 of the Internal Revenue Code for the
amount of the contribution for which the tax credit is claimed for Iowa tax
purposes.
(18) Charitable
contributions relating to the Iowa education savings plan trust. For tax years
beginning on or after January 1, 2016, certain qualifying organizations may
establish Iowa education savings plan trust accounts as participants, as
described in Iowa Code chapter 12D. Taxpayers may make charitable contributions
to such qualifying organizations so that the organization can deposit the
contribution into the organization's Iowa education savings plan trust account.
However, for Iowa income tax purposes, a taxpayer must add back any portion of
the federal charitable contribution deduction allowed for a contribution to a
qualifying organization, to the extent that the taxpayer designated that any
part of such contribution be used for the direct benefit of the taxpayer's
dependent or for the benefit of any other specific person chosen by the
taxpayer.
This rule is intended to implement Iowa Code section
422.7 and section
422.9 as amended by 2014 Iowa
Acts, House File 2468.
