Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 301 - Filing Return and Payment of Tax › Rule 701-301.15 - Special Tax Computation for Taxpayers Who Are 65 Years of Age or Older

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Tax
				years beginning on or after January 1, 2007, but before January 1,
				2009.
A special tax computation is available for determining the state
				income tax liability for certain taxpayers, except single taxpayers described
				in subrule 39.4(1), who are 65 years of age or older. For married persons
				filing jointly, filing separately on a combined return or filing separate
				returns, only one spouse is required to be 65 years of age or older on December
				31 of the tax year. Under this provision, the taxpayer multiplies the net
				income for the tax year in excess of $24,000 by the maximum individual income
				tax rate. The tax amount computed by this procedure is then compared to the tax
				amount on the individual's taxable income from the tax tables or the tax-rate
				schedule. The taxpayer is subject to the lesser of the two tax amounts. In the
				case of married taxpayers electing to file separate returns or separately on
				the combined return, the incomes of both spouses must be considered for
				purposes of determining the tax liability from the special tax computation. The
				tax liability calculated from the special tax computation is allocated between
				the spouses in the ratio of each spouse's net income to the combined net income
				of both spouses. For purposes of this rule, the partial exclusion of pension
				and other retirement benefits described in rule
				701-40.47 (422) and the
				phase-out exclusion for social security benefits described in 701-subrule
				40.23(3) must be included in the net income amounts when determining the tax
				liability from the special tax computation.
EXAMPLE; A married couple had gross income, which included
				  pensions, of $27,000 for 2007, and they elected to file separately on a
				  combined return. One spouse had gross income of $15,000, and the other spouse
				  had gross income of $12,000. Only one spouse was 65 years of age as of December
				  31, 2007. Each spouse was able to claim a $6,000 pension exclusion in
				  accordance with rule 701-40.47 (422). The one spouse
				  with a net income of $9,000 had a regular tax liability of $229, and the other
				  spouse with a net income of $6,000 had a regular tax liability of $70 for a
				  total regular tax liability in the amount of $299. The special tax computation
				  of these taxpayers is shown below:
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				  here to view Image
Since the taxpayers' special tax liability for 2007 was $269,
				  this tax was imposed since it was less than the taxpayers' regular tax
				  liability of $299. This special tax liability is allocated to each spouse on
				  the following basis:
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				  here to view Image
The special tax computation for low-income taxpayers is not
				  available to married taxpayers filing separate state returns or to married
				  taxpayers filing separately on the combined return form in instances where one
				  of the spouses has a net operating loss described in Iowa Code section
				  422.9, subsection 3, and the
				  spouse elects to carry back or carry forward the net operating loss. Also, the
				  special tax computation for low-income taxpayers is not available if the
				  taxpayer is required to annualize the taxpayer's income as described in rule
				  701-41.9 (422).
(2)
Tax years beginning on or after
				January 1, 2009.
A special tax computation is available for
				determining the state income tax liability for certain taxpayers, except single
				taxpayers described in subrule 39.4(1), who are 65 years of age or older. For
				married persons filing jointly, filing separately on a combined return or
				filing separate returns, only one spouse is required to be 65 years of age or
				older on December 31 of the tax year. Under this provision, the taxpayer
				multiplies the net income for the tax year in excess of $32,000 by the maximum
				individual income tax rate. The tax amount computed by this procedure is then
				compared to the tax amount on the individual's taxable income from the tax
				tables or the tax-rate schedule. The taxpayer is subject to the lesser of the
				two tax amounts. In the case of married taxpayers electing to file separate
				returns or separately on the combined return, the incomes of both spouses must
				be considered for purposes of determining the tax liability from the special
				tax computation. The tax liability calculated from the special tax computation
				is allocated between the spouses in the ratio of each spouse's net income to
				the combined net income of both spouses. For purposes of this rule, the partial
				exclusion of pension and other retirement benefits described in rule
				701-40.47(422) and the phase-out exclusion for social security benefits
				described in 701-subrule 40.23(3) must be included in the net income amounts
				when determining the tax liability from the special tax computation.
The special tax computation for low-income taxpayers is not
				  available to married taxpayers filing separate state returns or to married
				  taxpayers filing separately on the combined return form in instances when one
				  of the spouses has a net operating loss described in Iowa Code section
				  422.9, subsection 3, and the
				  spouse elects to carry back or carry forward the net operating loss. Also, the
				  special tax computation for low-income taxpayers is not available if the
				  taxpayer is required to annualize the taxpayer's income as described in rule
				  701-41.9 (422).
This rule is intended to implement Iowa Code section
				  422.5 as amended by 2006 Iowa
				  Acts, Senate File 2408.