Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 303 - Determination of Taxable Income › Rule 701-303.11 - Reduction in State Itemized Deductions for Certain High-income Taxpayers

Current through Register Vol. 47, No. 3, July 24, 2024
For tax years beginning after December 31, 1990, the itemized
				  deductions for certain high-income taxpayers are reduced for federal income tax
				  purposes by the lesser of 3 percent of the excess of adjusted gross income
				  (AGI) over the applicable amount, or 80 percent of the amount of itemized
				  deductions otherwise allowable for the taxable year. For 1991, the applicable
				  amount is $100,000 ($50,000 in the case of a married person filing a separate
				  federal return). The applicable amount is to be increased each tax year to
				  reflect inflation in the taxable years after 1991. For example, for 1995 the
				  applicable amount is $114,700 ($57,350 in the case of a married person filing a
				  separate return). This reduction in itemized deductions for certain high-income
				  taxpayers applies for Iowa individual income tax purposes for the same tax
				  years that the provision applies for federal income tax purposes. The following
				  subrules clarify how the reduction in itemized deductions is to be determined
				  on the Iowa individual income tax return:
(1)
Itemized deduction worksheet
				(Form 41-104).
High-income taxpayers who are itemizing deductions on
				the Iowa income tax return and whose itemized deductions for federal income tax
				purposes were subject to reduction because their federal adjusted gross incomes
				exceeded certain amounts (the amounts for 1996 were $117,950 for all taxpayers
				except married taxpayers who filed separate federal returns and $58,975 for
				married individuals who filed separate federal returns) must complete Itemized
				Deduction Worksheet (Form 41-104) to determine the amount of federal itemized
				deductions that can be claimed on the Iowa income tax return. This worksheet
				must also be used to compute the itemized deductions allowable on the Iowa
				return for taxpayers who claimed the standard deduction on their federal
				individual income tax return, but are itemizing deductions for Iowa income tax
				purposes and whose deductions would have been subject to reduction, if they had
				itemized deductions on their federal income tax return. These taxpayers must
				complete the worksheet (Form 41-104) as if they had itemized deductions on
				their federal returns. Generally, the itemized deductions allowed on the
				federal income tax return for high-income taxpayers are also allowed for Iowa
				individual income tax purposes, except that the Iowa income tax that was
				allowable as a deduction on the federal Schedule A is not allowed as an Iowa
				itemized deduction. In addition, the deduction for medical expenses claimed as
				an itemized deduction on the federal income tax return should be reduced by the
				amount of health insurance premiums claimed as a deduction on line 18 of the IA
				1040. The line references on Form 41-104 are to the federal 1040 and to the
				federal Schedule A for 1996 and to the IA 1040 for the 1996 tax year. Similar
				line references will apply on Form 41-104 and to IA 1040 for any later tax year
				when the taxpayer's federal itemized deductions were subject to reduction
				because the taxpayer's federal adjusted gross income exceeded the threshold
				amount for that year and the taxpayer itemized deductions on the Iowa income
				tax return. Note that if a taxpayer's itemized deductions are less than the
				Iowa standard deduction amount, the taxpayer may elect to claim the Iowa
				standard deduction.
Form 41-104 follows:
1. Enter the allowable federal itemized deductions as
							 shown on line 34 of the 1040.
1.
2. Add the amounts on federal Schedule A, lines *4,
							 13, 19 plus any gambling losses including on line 27 and enter the total
							 here.
2.
3. Subtract line 2 amount from line 1 amount.
3.
4. Add the amounts on federal Schedule A, lines *4,
							 9, 14, 18, 19, 26, and 27 and enter the total here.
4.
5. Subtract line 2 amount from line 4 amount.
5.
6. Divide line 3 by line 5 and enter percentage
							 here.
6. %
7. Enter the amount of Iowa income tax that is
							 included in line 5 of the federal Schedule A.
7.
8. Multiply line 7 by the percentage on line
							 6.
8.
9. Subtract line 8 from line 1. Enter this amount
							 here and on line 39 of the IA 1040.
9.
*The deduction for medical expenses from line 4 of federal
				  Schedule A must be reduced by the amount of any health insurance premiums that
				  were deducted on line 18 of Form IA 1040 in computing the taxpayer's net income
				  for the tax year.
(2)
				Reserved.
This rule is intended to implement Iowa Code sections
				  422.3 and
				  422.9.