How does Iowa's tax laws differ from federal's tax laws?
The 2018 Tax Cuts & Jobs Act made significant changes to the IRS tax code. Iowa, however, is not conforming to most of these changes until 2019 or later. Because of that, there may be significant differences between what credits and deductions are allowed on your Iowa return versus your federal return.
Here are some of the major differences that may affect your Iowa return:
- Iowa did not conform to federal's new limitation that only allows moving expenses to be claimed by military personnel. If you moved more than 50 miles away for work, you may qualify for a moving expenses adjustment on your Iowa return even if you didn't on federal.
- Iowa did not conform to federal's higher standard deduction. Even if you don't have enough deductions to itemize on your federal return, you might still want to itemize for Iowa.
- Iowa did not conform to federal's removal or limitation of several itemized deductions. For Iowa purposes, you can still claim itemized deductions for unreimbursed job expenses, casualty and thefts even if unrelated to a federally declared disaster, and tax preparation fees, among other miscellaneous items. Iowa also does not follow the new federal limits for state and local taxes, mortgage interest, or charitable deductions.
- Iowa did not conform to any of the federal changes made concerning depreciation. You may need to recalculate depreciation amounts for Iowa purposes if your assets are affected by federal laws.
- Iowa did not conform to the new federal limitation on business losses, so excess losses do not need to be added back in for Iowa purposes.
- Iowa did not conform to federal's allowed deferral of investment gain for Opportunity Zones. Any deferred amount will need to be included in Iowa taxable income for 2018. When the deferred amount is claimed on your federal return, you'll be allowed a subtraction for that income on your Iowa return since you'll have already paid taxes on that income.
- Iowa did not conform to the exclusion from income of student loan debt amounts forgiven because of death or permanent disability. Any amounts excluded on your federal return under this provision will need to be added back on your Iowa return.