WHAT'S NEW?
LEGISLATIVE UPDATE
The 2006
Legislative Summary is available online only.
The phase-out
of tax on Social Security benefits does not begin until January 1,
2007. Therefore, the phase-out is not calculated on the 2006 IA 1040.
The increase
in filing thresholds for taxpayers 65 and older does not begin until
January 1, 2007. Therefore, the change does not apply to the 2006 IA 1040.
The alternate
tax calculation for taxpayers 65 or older does not begin until January
1, 2007. Therefore, it is not available on the 2006 IA 1040.
Capital
gains deduction: Beginning January 1, 2006, Iowa follows Federal
holding period rules. The material participation requirements have
not changed.
In addition to the legislative change, the department has
revised its position on another aspect of the capital gains deduction. Previously,
the department had taken the position that in order to claim a capital gain
exclusion for individual income tax, a taxpayer must be in a net capital
gain position on the federal return. If a taxpayer was in a net capital gain
position, then the capital gain exclusion could exceed the capital gains
reported on the federal return if the qualifying gain was offset by non-qualifying
capital losses (such as stock sales). After a review by the Attorney General's
office, the department has changed its position on this issue and will allow
a capital gain exclusion from qualifying gains even if the taxpayer was in
a capital loss position on the federal return.
Other legislative
changes are incorporated in the Line Changes information
below.
LINE CHANGES
Line
2 New exempt securities
- IA Utilities Board and Consumer Advocate Building Bonds, IA Code
Sec. 422.7(45)
- Honey Creek Premier Destination Park Bonds, IA Code Sec. 463C.12(8).
Line
24 New adjustments
- Alternative motor vehicle deduction
- Grants from injured veterans program
- Contributions to injured veterans program
- Capital or ordinary gain from involuntary conversion related to
eminent domain
Congress
reinstated the federal deductions for Educator
Expenses and Tuition and Fees for tax year
2006.
Line
24 Adjustment name change
Alternative motor vehicle
deduction of $2,000 for those completing Federal form 8910 (Alternative Motor Vehicle
Credit). This had been called the hybrid/clean fuel vehicle deduction on last year's return.
Line
24 Amount of College
Savings Iowa (529)
Plan
- The deductible
amount for tax year 2006 cannot exceed $2,500 per beneficiary.
- A rollover
from another state's 529 plan qualifies toward the deduction for Iowa income
tax.
Line
33 FICA amount
FICA payments for
tax year 2006 in excess of $5,840.40 for Social Security tax for each
person can be deducted as a Federal
tax payment.
Line 37 Itemized Deductions
The itemized
deduction for state sales and use tax paid will be allowed on
the 2006 Federal and Iowa Schedule A. However, Congress reinstated this
deduction after the 2006 Iowa Schedule A was printed.
Please see the instructions for line 37 on how to take this deduction.
School Tuition Organization Tax Credit Contributions: Do not include as an itemized deduction
any contributions for which a credit is claimed on line 54 of the IA 1040.
Injured Veterans Grant Program Contributions: These contributions do not qualify
as itemized deductions.
For those itemized deduction
calculations dependent upon Federal Adjusted Gross Income (AGI), the Federal
AGI thresholds for tax year 2006 are $150,500 and $75,250.
Line 41 Standard
Deduction
for tax year 2006:
Filing Status 1: $1,650
Filing Status 3 & 4: $1,650
Filing Status 2, 5 or 6: $4,060
Line
54 New credits and form
- School Tuition Organization Tax Credit Contributions
- Wind Energy Production
and Renewable Energy Tax Credit
New form IA 148 Tax Credits Schedule must be completed.
The Endow Iowa Tax Credit
is a permanent credit.
Line
59 Checkoffs
A new Veterans Trust Fund checkoff has been added. The
Keep Iowa Beautiful and Volunteer Firefighters checkoffs have been combined.
Line
65 New credit
Early Childhood Development
Tax Credit: Only one of the two credits listed on this line may be
taken -- Child and Dependent Care Credit OR Early Childhood Development
Tax Credit. Only taxpayers with a net income of less than $45,000 are
eligible to take one of these credits.
Line
66 New
credits and form
- E85 Gasoline Promotion Tax Credit
- Biodiesel Blended Fuel Tax Credit
- Soy-Based Transformer
Fluid Tax Credit
New form IA 148 Tax Credits
Schedule must be completed.
Line
74 Interest rate
in 2007
10% per year; 0.8% per month;
OTHER NEWS
Due date: April
30, 2007
Military
Tax
Rate Schedules
Payment Options
Power of Attorney Form
The Federal Power of Attorney
form is accepted by the Iowa Department of Revenue. You must write a statement
on the Federal form that indicates you are submitting it for use with State
of Iowa forms. The statement needs to be initialed by the taxpayer.
Form no longer applicable
or produced
IA 133A New Jobs Credit
Carry Forward Schedule
