Intro 4: IA 1040 Schedule 1

Step Subject: Schedule 1
Instruction Year: 2023

Schedule 1 (located on page 4 of the IA 1040) is used to report Iowa adjustments to federal taxable income. Amounts should only be reported if there is a difference between the federal and Iowa reportable amounts. Column A should be used to report additions to federal taxable income and Column B should be used to report subtractions from federal taxable income. Report all amounts as a positive number.

Line 1: Interest

Column A: Enter interest from state and municipal securities, to the extent not already included in federal taxable interest on the IA 1040, line 2, unless specifically exempt from Iowa tax.

However, interest from certain Iowa state and municipal securities is exempt from Iowa tax and should not be included on this line. For more information, see Iowa Administrative Code rules 701—302.2 and 701—302.3.

The following securities are exempt:

• Aviation Authority Bonds, Iowa Code section 330A.16
• Beginning Farmer Loan Program Bonds, Iowa Code section 175.17(10)
• Community College Bond Program Bonds, Iowa Code section 260C.71(6)
• Community College Residence Halls and Dormitories Bonds, Iowa Code section 260C.61
• County Health Center Bonds, Iowa Code section 331.441(2)"C"(7)
• E911 Emergency Telephone Service Program Bonds, Iowa Code section 34A.20(6)
• Interstate Bridges Bonds, Iowa Code section 313A.36
• Iowa Board of Regents Bonds for buildings and facilities, Iowa Code sections 262.41, 262.51, 262.60, and 262A.8
• Iowa Higher Education Loan Authority, Iowa Code section 261A.27
• Iowa Municipality Urban Renewal Bonds, Iowa Code section 403.9(2)
• Iowa Rural Water District Revenue Bonds and notes, Iowa Code section 357A.15
• Low Income Housing Bonds, Iowa Code section 403A.12
• Prison Infrastructure Revenue Bonds, Iowa Code section 16.177(8)
• Regents Institutions Medical and Hospital Buildings at University of Iowa Bonds, Iowa Code section 263A.6
• Soil Conservation Districts Revenue Bonds, Iowa Code section 161A.22
• Quad Cities Interstate Metropolitan Authority Bonds, Iowa Code section 28A.24
• Sewage Treatment Works Revenue Bonds, Iowa Code section 16.131(6)
• Underground Storage Tank Fund Revenue Bonds, Iowa Code section 455G.6(14)
• Vision Iowa Program, Iowa Code section 12.71
• Iowa Utilities Board and Consumer Advocate Building Bonds, Iowa Code section 12.91(9)
• School Infrastructure Program Bonds, Iowa Code section 12.81(8)
• Appropriation Bonds, Iowa Code section 12.87(8)

Column B: Enter interest received from federal securities (for example, U.S. Savings Bonds, U.S. Treasury Notes), to the extent included on the IA 1040, line 2. Do not include interest from repurchase agreements of U.S. Government securities.

The following list contains widely held United States Government obligations, but is not intended to be all-inclusive.

The following are exempt and should be included in Column B to the extent they are included in federal taxable income:

1. a. United States Government obligations: United States Treasury - Principal and interest from bills, bonds, and notes issued by the United States Treasury exempt under 31 USC section 3124(a).
   • Series E, EE, F, G, H and I bonds
   • United States Treasury bills
   • U.S. Government certificates
   • U.S. Government bonds
2. U.S. Government notes
3. b. Territorial obligations:
   • Guam - Principal and interest from bonds issued by the Government of Guam (48 USCS section 1423[a]).
   • Puerto Rico - Principal and interest from bonds issued by the Government of Puerto Rico (48 USCS section 745).
   • Virgin Islands - Principal and interest from bonds issued by the Government of the Virgin Islands (48 USCS section 1403).
   • Northern Mariana Islands - Principal and interest from bonds issued by the Government of the Northern Mariana Islands (48 USCS section 1681(c)).
4. c. Federal agency obligations:
   • Commodity Credit Corporation - Principal and interest from bonds, notes, debentures, and other similar obligations issued by the Commodity Credit Corporation (15 USCS section 713a–5).
   • Banks for Cooperatives - Principal and interest from notes, debentures, and other obligations issued by Banks for Cooperatives (12 USCS section 2134).
   • Farm Credit Banks - Principal and interest from systemwide bonds, notes, debentures, and other obligations issued jointly and severally by Banks of the Federal Farm Credit System (12 USCS section 2023).
   • Federal Land Bank Association - Principal and interest from bonds, notes, debentures, and other obligations issued by the Federal Land Bank Association (12 USCS section 2098).
   • Financial Assistance Corporation - Principal and interest from notes, bonds, debentures, and other obligations issued by the Financial Assistance Corporation (12 USCS section 2278b–10[b]).
   • Production Credit Association - Principal and interest from notes, debentures, and other obligations issued by the Production Credit Association (12 USCS section 2077).
   • Federal Deposit Insurance Corporation (FDIC) Principal and interest from notes, bonds, debentures, and other such obligations issued by the Federal Deposit Insurance Corporation (12 USCS section 1825).
   • Federal Financing Bank - Interest from obligations issued by the Federal Financing Bank. Considered to be United States Government obligations (12 USCS section 2288, 31 USCS section 3124[a]).
   • Federal Home Loan Bank - Principal and interest from notes, bonds, debentures, and other such obligations issued by any Federal Home Loan Bank and consolidated Federal Home Loan Bank bonds and debentures (12 USCS section 1433).
   • Federal Financing Corporation - Principal and interest from notes, bonds, debentures, and other such obligations issued by the Federal Financing Corporation (12 USCS section 2288(b)).
     Financing Corporation (FICO) - Principal and interest from any obligation of the Financing Corporation (12 USCS Sections 1441[e][7] and 1433).
   • General Services Administration (GSA) - Principal and interest from General Services Administration participation certificates. Considered to be United States Government obligations (31 USCS section 3124[a]).
   • Housing and Urban Development (HUD). Principal and interest from War Housing Insurance debentures (12 USCS section 1739[d]).
     *  Principal and interest from Rental Housing Insurance debentures (12 USCS section 1747g[g]).
     *  Principal and interest from Armed Services Mortgage Insurance debentures (12 USCS section 1748b[f])
     *  Principal and interest from National Defense Housing Insurance debentures (12 USCS section 1750c[d]).
     *  Principal and interest from Mutual Mortgage Insurance Fund debentures (12 USCS section 1710[d]).
   • National Credit Union Administration Central Liquidity Facility - Income from notes, bonds, debentures, and other obligations issued on behalf of the National Credit Union Administration Central Liquidity Facility (12 USCS section 1795k[b]).
   • Resolution Funding Corporation - Principal and interest from obligations issued by the Resolution Funding Corporation (12 USCS Sections 1441[f][7] and 1433).
   • Student Loan Marketing Association (Sallie Mae) - Principal and interest from obligations issued by the Student Loan Marketing Association. Considered to be United States Government obligations (20 USCS section 1087–2[1], 31 USCS section 3124[a]).
   • Tennessee Valley Authority - Principal and interest from bonds issued by the Tennessee Valley Authority (16 USCS section 831n–4[d]).
   • United States Postal Service - Principal and interest from obligations issued by the United States Postal Service (39 USCS section 2005[d][4]).
   • Certificates on Government Receipts.

The following are not considered federal securities and are taxable and should not be included in Column B:

Federal Agency Obligations:

• Building and Loan Associations
• Credit Unions, federal or state
• Export-Import Bank of the United States
• Federal Agricultural Mortgage Corporation (Farmer Mac)
• Federal Home Loan Mortgage Corporation (Freddie Mac) Securities
• Federal Housing Administration
• Federal income tax refunds, interest
• Federal National Mortgage Association
• Federal National Mortgage Association (Fannie Mae) Securities
• Government National Mortgage Association (Ginnie Mae) Securities
• Merchant Marine (Maritime Administration)
• Money Market Certificates
• Mortgage Participation Certificates
• Savings and Loan Associations, federal or state
• Small Business Administration

Obligations of International Institutions:

• Asian Development Bank
• Inter-American Development Bank
• International Bank for Reconstruction and Development (World Bank)

Other Obligations:

• Washington D.C. Metro Area Transit Authority  

Married Separate Filers:
Divide interest income based on ownership of the account or certificate.

• Jointly held: Divide equally between spouses.
• Held in the name of only one spouse: Allocate interest wholly to that spouse.

Line 2: Dividends

Column A: Include all dividends from mutual funds, investment trusts, or regulated investment companies investing in state and municipal bonds.

Column B: Include that portion of any net dividends from a mutual fund, investment trust, or regulated investment company that is attributable to direct federal securities. You cannot take this deduction unless you are provided a statement from the fund giving the percentage of net dividends attributable to direct federal securities. If a return is filed on paper, a copy of the statement must be included with the return to take this deduction.

Interest income from repurchase agreements involving federal securities cannot be deducted.

Married Separate Filers:
Divide dividends based on registered ownership of stock.

• Jointly held: Divide equally.
• Held in the name of only one spouse: Allocate dividends wholly to that spouse.

Line 3: RESERVED FOR FUTURE USE

Line 4: RESERVED FOR FUTURE USE

Line 5: Social Security Benefits

Line 6: Active Duty Military Pay

Enter in column B the amount of active duty military pay. Members of the armed forces, armed forces military reserve, or the national guard in an active duty status can exclude pay received from the federal government for military service performed, to the extent it was included in IA 1040, line 2, federal taxable income.

For more information, see Iowa Tax Responsibilities of Servicemembers and Their Spouses

Line 7: IRA/Pension/Railroad Retirement Income

If you or your spouse receive federal taxable income from a governmental or other pension or retirement plan you may be eligible to exclude that amount from your Iowa income. 

To take this exclusion, the income recipient must meet one of the following conditions:

1. 55 years of age or older on December 31, 2023, or
2. Disabled, or
3. A surviving spouse or a survivor having an insurable interest in an individual who would have qualified for the exclusion in 2023 on the basis of age or disability.

Examples of distributions from the following plans that qualify for the exclusion include:

• Distributions from individual retirement plans (IRA) authorized under section 408 of the Internal Revenue Code (IRC)
• Distributions from a simplified employee pension (SEP) plan;
• Distributions from a savings incentive match plan for employees (SIMPLE) retirement plan;
• Distributions from a Keogh plan;
• Distributions from qualified pension plans as described in Treasury Regulation section 1.401-1(b)(1)(i), including IPERS;
• Roth conversion income;
• Distributions from qualified deferred compensation plans governed by the Employee Retirement Income Securities Act (ERISA) including a 401(k), 403(b), and 457(b) plan; 
• Annuity distributions pursuant to IRC section 402(a).
• Distributions from an Employee Stock Ownership Plan (ESOP) as defined in section 4975(e)(7) of the IRC

Include in this deduction the total amount of railroad retirement income that is included in federal taxable income regardless of age or disability status.

Note: Nonqualified deferred compensation plans and nonqualified annuities are not eligible for the retirement income exclusion.

For more information, see Iowa Administrative Code rule 701—302.47 and our Retirement Income Tax Guidance.

Enter in column B the amount of social security benefits included in federal taxable income from federal form 1040, line 6b. Iowa does not tax Social Security benefits.

Line 8: Railroad Unemployment Income

Enter in column B the amount of any railroad unemployment income from the Railroad Retirement Board.

Line 9: Bonus Depreciation/Section 179 Expenses

Enter the expense and depreciation adjustment from the IA 4562A and the IA 4562B. Include the IA 4562A and the IA 4562B with your return. Column A should be used to report additions to federal taxable income and Column B should be used to report subtractions from federal taxable income. Report all amounts as a positive number.

Line 10: Federal Net Operating Loss prior to 1/1/23

Enter in column A your federal net operating loss carried forward from a year prior to January 1, 2023. Include the IA 124 with your return. Report all amounts as a positive number.

Line 11: Other Income

Enter other income or adjustments not reported on lines 1-10 which have not already been included on IA 1040, line 2. Write an explanation of the type of adjustment on a separate form or schedule. Column A should be used to report additions to federal total income and Column B should be used to report subtractions from federal total income. Report all amounts as a positive number. Examples of income or adjustments to be reported include:

a. Babysitting income

Report all babysitting income not already reported on Federal Schedule C, line 1.

b. RESERVED FOR FUTURE USE

c. RESERVED FOR FUTURE USE

d. College Savings Iowa or Iowa Advisor 529 Plan

Amounts received from the cancellation of a participation agreement or other non-qualifying withdrawal to the extent the amount was previously deducted on the IA 1040. Qualifying withdrawals may include up to $10,000 per beneficiary per year for tuition expenses of attending an accredited elementary or secondary (K-12) school in Iowa or an out-of-state elementary or secondary school that educates a beneficiary who is a child “requiring special education” under Iowa Code section 256B.2. The $10,000 per-beneficiary cap applies even if the beneficiary receives money from multiple College Savings Iowa or Iowa Advisor 529 Plan accounts. The $10,000 annual cap does not apply to withdrawals used to pay qualified education expenses related to higher education. Qualifying withdrawals include withdrawals for certain expenses related to participation in an apprenticeship program and withdrawals, up to $10,000, used to pay either principal or interest on a qualified education loan on behalf of a beneficiary or a beneficiary’s sibling. If you withdrew funds from a 529 Plan to pay qualified higher education expenses and you received a refund of those funds, the refund amount is considered a qualifying withdrawal if it is recontributed to the same Iowa 529 Plan account from which it was withdrawn within sixty (60) of the date of the refund. To be a qualifying withdrawal, the recontribution amount cannot exceed the amount of the refund from the qualifying higher education institution.

e. Director’s Fees

Enter director’s fees which have not already been included on IA 1040, line 2. 

f. RESERVED FOR FUTURE USE

g. Executor’s Fees

Enter executor’s fees which have not already been included on IA 1040, line 2.

h. First-time Home Buyers Account Non-Qualifying Withdrawals

Non-qualifying withdrawals from your Iowa First-time Homebuyer Savings Account that were previously deducted on the IA 1040 must be added back on this line, along with any applicable penalty. Non-qualified withdrawals required to be added back here are assessed a penalty equal to 10% of the amount of the withdrawal, unless the non-qualifying withdrawal was made by reason of the death of the account holder or certain other circumstances. If an account holder makes a non-qualifying withdrawal, they are not permitted to claim a deduction for any future contribution to any First-time Homebuyer Savings Account. All withdrawals (qualifying and non-qualifying) from your First-time Homebuyer Savings Account must be reported to the Department on the Iowa First-time Homebuyer Savings Account Withdrawal Form within 90 days of the date of withdrawal.

i. Partnership Income and/or S Corporation Income

Report any all-source Iowa modifications reported on an IA Schedule K-1 that increased the income.

j. RESERVED FOR FUTURE USE

k. State Income Tax Refunds

Report state income tax refunds other than Iowa to the extent that the tax refunded in 2023 was a deduction on a prior Iowa return and not already included on IA 1040, line 2.

l. RESERVED FOR FUTURE USE

m. RESERVED FOR FUTURE USE

n. Net Premium Tax Credit

The Net Premium Tax Credit from the 2022 federal 1040, Schedule 3, line 9 will be reported as Other Income on this line. The Net Premium Tax Credit is reportable income to the extent these credits were a reimbursement for health insurance premiums deducted from Iowa income in a prior year.

If the deduction is taken on the IA 1040 Schedule A (for tax years prior to 2023), then the federal tax guidance should be followed when addressing the complications due to the impact of the Federal Excess Advance Premium Tax Credit repayment and the Net Premium Tax Credit.

However, if the deduction is taken on IA 1040, line 18 (for tax years prior to 2023), then the IA 1040, Schedule 1, Line 11, must reflect the impact of the Federal Excess Advance Premium Tax Credit repayment and the Net Premium Tax Credit. The Iowa expanded instructions for this line and IA 1040, Schedule 1, line 15 set forth the Department’s guidance for the correct reporting of these amounts.

o. Iowa ABLE Savings Plan

Report amounts received from cancellation of accounts or other non-qualifying withdrawals to the extent the amount was previously deducted on the IA 1040.

p. RESERVED FOR FUTURE USE

q. RESERVED FOR FUTURE USE

r. RESERVED FOR FUTURE USE

s. RESERVED FOR FUTURE USE

t. RESERVED FOR FUTURE USE

u. RESERVED FOR FUTURE USE

v. RESERVED FOR FUTURE USE

w. RESERVED FOR FUTURE USE

x. Other Nonconformity Adjustments

See IA 101 Nonconformity Adjustments Schedule. Include IA 101 with your return.

y. IA 163 Interest Expenses Adjustment

Report any interest expenses adjustment. Include IA 163 with your return.

z. RESERVED FOR FUTURE USE

aa. Premium Pay Payments

Report to the extent included in federal taxable income, up to $1,000, the amount of:

1. Premium pay received by a certified peace officer who was designated by the governor of the State of Iowa as an eligible worker.
2. Premium pay received by a correctional officer or medical staff member at a correctional facility who was designated by the governor of the State of Iowa as an eligible worker.
3. Premium pay received by a teacher employed by an independently accredited school or a teacher employed by the State of Iowa who was designated by the governor as an eligible worker.
4. Teacher retention payment received by a teacher that was funded from moneys received by the State of Iowa from the elementary and secondary school emergency relief fund pursuant to the federal Coronavirus Response and Relief Appropriations Act or the American Rescue Plan Act of 2021.
5. Teacher retention payment received by a teacher employed by a private school or specially accredited school, that was funded from the private sector worker premium pay program administered by the department of education that was funded from the State of Iowa moneys.
6. Recruitment and retention bonus received by a child care worker through the recruitment and retention bonus program administered by the department of human services.

bb. Other Income not Included in Federal Taxable Income that is Taxable for Iowa Purposes

Certain Iowa tax credits require taxpayers who claim those credits to make adjustments to their itemized deductions for the contributions associated with those credits. The amount of the contributions associated with the credits should be added back to taxable income. Those credits include: 

• Charitable Conservation Contribution Tax Credit 
• Endow Iowa Tax Credit 
• Farm-to-Food Donation Tax Credit 
• Hoover Presidential Library Tax Credit 
• School Tuition Organization Tax Credit 

cc. Military Retirement Income 

Line 12: Total modifications to federal total income

Add lines 1 through 11.

Line 13: Net modifications to federal total income

Subtract line 12, column B from line 12, column A.

Line 14: Federal income tax refund or overpayment received in 2023

To find out the amount of your federal refund, contact the IRS at 1-800-829-1040 or www.irs.gov. If you received a federal tax refund in 2023, you must report the amount on IA 1040 Schedule 1, line 14. It must be reported even if you used the standard deduction on the prior year’s Iowa return. The federal refund must be included on this line because you benefited from being able to deduct federal taxes on the prior year’s Iowa return, which reduced your Iowa taxable income for that year. The amount reported on the IA 1040 Schedule 1, line 14 should not exceed the total amount of any federal tax deduction taken on the prior year(s) Iowa return. The total overpayment is reported on Schedule 1, line 14.

Any portion of the federal refund received due to the fuel tax credit must be reported on the Iowa return. Include any amount received in 2023 due to excess FICA payments if the amount was claimed as a federal tax payment on the 2022 Iowa return. Report any federal income tax refund received in 2023 for tax year 2022 or any other years that were amended or filed late.

Do not include the portion of the federal refund attributable to the following :

• Do not include federal refundable credits such as earned income tax credit, additional child tax credit, refundable education credit, net premium tax credit, or recovery rebate credit.
• You are filing an Iowa return for 2023 for the first time. A refund of federal tax received in 2023 is not reported if the tax was not deducted from Iowa income in a prior year.
• The refund you received was from a year in which you did not take a deduction for the payment of federal tax because your income was less than the minimum amount for paying Iowa tax or your tax for that year was calculated using the alternate tax computation.
• You were a nonresident for the tax year of the refund and were not required to file an Iowa return for that year.

Married Separate Filers:
If the refund received in 2023 was from a jointly-filed federal return, it must be divided between the spouses in the ratio of the spouses’ Iowa net incomes in the year for which the refund was issued.

Line 15: Health Insurance Deduction

For taxpayers who are 65 years of age or older and whose Iowa taxable income is less than $100,000, enter 100% of the amount paid for health and dental insurance premiums paid with post-tax funds. Typically, employer health insurance premiums are made on a pre-tax-basis when they are deducted from wages. Do not include any amount of health insurance that was used as a deduction in the computation of federal taxable income, this includes amounts reported on federal 1040, Schedule A, line 1, and federal 1040, Schedule 1, Part II, line 17.

Enter 100% of the amount paid for:

• health insurance premiums paid with post-tax dollars
• supplemental health insurance, such as:
  • Medicare B supplemental medical insurance
  • Medicare D voluntary prescription drug insurance
• dental insurance premiums paid with post-tax dollars
• long-term nursing home coverage premiums paid with post-tax dollars regardless of age

Do NOT include:

• “Medicare tax withheld” on your W-2
• premiums paid with pre-tax dollars
• premiums which are later reimbursed, in the same tax year

The $100,000 taxable income limitation is calculated without regard to filing status, meaning that a single taxpayer, a married taxpayer filing separately, and a couple that files married filing jointly will all have a $100,000 taxable income limitation.

Health Insurance Taxable Income Worksheet

To calculate taxable income for purposes of this deduction, use the following calculation:

If line 3 is less than $100,000 and you are age 65 or older you are eligible to deduct health and dental insurance paid with post-tax funds.

If line 3 is $100,000 or more you are NOT eligible to deduct health and dental insurance, IA 1040, Schedule 1, line 15 should be changed to zero.

The deduction must be reduced by the amount of any premium reimbursement from Health Reimbursement Arrangements (HRAs).

Federal Health Insurance Credits

Any Excess Advance Premium Tax Credit repayment from the 2022 federal form 1040, Schedule 2, line 2 will be entered on IA 1040, Schedule 1, line 15 in the year paid (For tax years 2023 and later). Any repayment calculated on your 2023 federal return cannot be included on the 2023 IA 1040, Schedule 1, line 15.

The Net Premium Tax Credit from the 2023 federal form 1040, Schedule 3, line 9 will be reported as Other Income on the 2024 IA 1040, Schedule 1, line 11. The federal Net Premium Tax Credit is reportable income to the extent this credit was a reimbursement for health insurance premiums deducted from Iowa income in a prior year.

If the deduction is taken on the IA 1040, Schedule A (For tax years prior to 2023), then the federal tax guidance should be followed when addressing the complications due to the impact of the Federal Excess Advance Premium Tax Credit repayment and the Net Premium Tax Credit.

Married Separate Filers:
If both spouses have self-employment income, the deduction for self-employed health insurance must be allocated between the spouses in the ratio of each spouse’s self-employment income to the total self-employment income of both spouses. If health insurance premiums are paid directly by one spouse, that spouse will claim the entire deduction.

If both spouses paid through a joint checking account, the deduction is allocated between the spouses in the ratio of each spouse’s Iowa taxable income to the total Iowa taxable income of both spouses. For this Iowa taxable income calculation, do not include the health insurance deduction. If one spouse is employed and has post-tax health insurance premiums paid through wages, that spouse will claim the entire deduction. If both spouses pay post-tax health insurance premiums through their wages, each spouse will claim what each spouse paid.

Line 16: Capital Gains Deduction

You must complete and include the applicable IA 100 with your return to claim the Iowa capital gain deduction. In addition to the instructions and guidance found in the applicable IA 100, flowcharts to assist in determining if a gain qualifies can be found on the Department’s website.

Married Separate Filers:
Divide the capital gain deduction based on ownership of the asset.

• Jointly held: Divide equally between spouses.
• If other than jointly held: Divide between spouses based on percentage of ownership.

Each spouse must file a separate form of the applicable IA 100.

Line 17: Iowa Net Operating Loss (NOL) prior to 1/1/23

Enter the Iowa NOL carried forward from a tax year prior to January 1, 2023 from IA 124, Part II, line 5. Include the IA 124 with your return.

Line 18: Federal Tax Paid for Prior Years

Enter the amount of additional federal income tax paid during 2023 for tax year 2022 and any prior tax years. The amount of additional federal income tax paid is deductible only if Iowa income tax returns were required to be filed for the year for which the additional federal income tax was paid. Include only the actual federal income tax payments made in 2023, but do not include penalties and interest.

For taxpayers whose reporting method was to report the amount of self-employment, household tax, or other federal taxes in the following year, reduce the amount of federal tax paid reported on line 18 by the following:

• Excess advance premium tax credit repayment reported on the 2022 federal 1040, Schedule 2, line 2
• Federal self-employment tax reported on the 2022 federal 1040, Schedule 2, line 4
• Total additional Social Security and Medicare tax reported on the 2022 federal 1040, Schedule 2, line 7
• Additional tax on IRAs or other tax-favored accounts reported on the 2022 federal 1040, Schedule 2, line 8
• Federal household employment taxes reported on the 2022 federal 1040, Schedule 2, line 9
• Repayment of first-time homebuyer credit reported on the 2022 federal 1040, Schedule 2, line 10
• Additional Medicare tax from federal form 8959 reported on the 2022 federal 1040, Schedule 2, line 11
• Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance from Form W-2, box 12, reported on the 2022 federal 1040, Schedule 2, line 13
• Interest on tax due on installment income from the sale of certain residential lots and timeshares reported on the 2022 federal 1040, Schedule 2, line 1
• Interest on the deferred tax on gain from certain installment sales with a sales price over $150,000 reported on the 2022 federal 1040, Schedule 2, line 15
• Recapture of low-income housing credit reported on the 2022 federal 1040, Schedule 2, line 16
• Other additional federal taxes reported on the 2022 federal 1040, Schedule 2, line 18

Note: If line 18 results in a negative amount, due to the adjustments reported above, report this amount as a positive figure and add this amount to the amount reported on Schedule 1, line 14.

Married Separate Filers:
The additional federal tax paid must be divided between the spouses in the ratio of the spouses’ Iowa net incomes for the prior years for which they paid additional federal income tax.

Line 19: Other Adjustments

Enter the total of other allowable adjustments as listed below. Include an explanation for each adjustment on a separate form or schedule. Column A should be used to report additions to federal taxable income and Column B should be used to report subtractions, deductions and exclusions from federal taxable income. Report all amounts as a positive number.

a. Accrual method

Taxpayers who had capital gains in 2023 that were reported on the installment method for federal tax purposes and the entire gain was reported for Iowa in a prior year do not have to report installments.

b. RESERVED FOR FUTURE USE

c. RESERVED FOR FUTURE USE

d. RESERVED FOR FUTURE USE

e. RESERVED FOR FUTURE USE

f. Claim of Right Deduction

If income was repaid in the 2023 tax year and was reported and taxed on a prior Iowa return, that income may be deducted on the 2023 tax return. However, it may be to your advantage to take a credit on line 26. You may take either the deduction on Schedule 1, line 19 or take a credit on line 26, but not both.

Example: A taxpayer reported $7,000 in unemployment benefits on the 2022 Iowa return. The taxpayer’s 2022 AGI exceeded $150,000 without including the unemployment income. The taxpayer did not qualify for the unemployment exclusion. In early 2023 the taxpayer was notified that $4,000 of the unemployment benefits had to be repaid. The benefits were repaid by the end of 2023. The taxpayer may claim a $4,000 income adjustment on the 2023 IA 1040, Schedule 1, line 19.

g. College Savings Iowa or Iowa Advisor 529 Education Savings Plans

If you or your spouse participate in the College Savings Iowa 529 Plan (Iowa Educational Savings Plan Trust) or the Iowa Advisor 529 Plan, each may deduct an amount contributed not to exceed $3,785 per beneficiary. This deduction is only available for contributions to Iowa 529 plans.

You must be the "participant" in the Iowa 529 plan in order to deduct your contributions. If you are not the "participant" in the Iowa 529 plan, you may not deduct your contributions to that plan.

Example: Adam and Tara have 2 children; Charlie and Ruth. Adam opens two 529 accounts – one for Charlie and one for Ruth. Tara also opens two 529 accounts one for Charlie and one for Ruth. Both Adam and Tara can take up to $3,785 per child’s account. Adam and Tara each are eligible for a deduction of up to $7,570. Adam and Tara’s total potential deduction amount is $15,140.

Only contributions to these two Iowa 529 plans qualify for a deduction on the Iowa return; however, a rollover from another state's 529 plan to one of the Iowa plans qualifies toward the deduction for Iowa income tax. If you received a refund of any qualified higher education expenses from an eligible educational institution and recontributed the refund amount consistent with Iowa Code section 422.7(22)(c)(1)(f)(i), you may not deduct the recontribution amount when calculating your Iowa taxable income and the recontribution amount will not be considered when determining whether you have met the annual deduction cap.

Be sure you have properly shown these contributions as a deduction for one of these plans. Most computer software programs will ask for this information and correctly indicate the appropriate reason for the deduction.
Individuals making a contribution on or before the Iowa income tax return filing deadline (April 30 for calendar year tax filers), excluding extensions, can elect to have that contribution treated as though it was made on the last day of the preceding calendar year, which allows them to claim the income tax deduction for the most recently completed tax year.

h. Disability income exclusion

You may exclude from Iowa taxable income a portion of the disability pay you received in 2023 if you meet ALL of the following conditions:

• You received disability pay, and
• You were not yet 65 when your tax year ended, and
• You retired on disability and were totally and permanently disabled when you retired, and
• On January 1, 2023, you had not yet reached the age when your employer's retirement program would have required you to retire.

If you meet all of these conditions, include form IA 2440. You MUST complete form IA 2440 to take this exclusion. A doctor's statement must accompany each year's return attesting to the taxpayer's complete and permanent disability.

i. RESERVED FOR FUTURE USE

j. First-Time Homebuyer Savings Account qualifying contributions

You may deduct up to $2,181 ($4,363 for married filing jointly) in qualifying Iowa First-Time Homebuyer Savings Account contributions made during the tax year. This deduction limitation is based on the account holder, so even though you may have contributed to multiple accounts for more than one beneficiary, your total deduction may not exceed $2,181 ($4,363 for married filing jointly).

Contributions are only deductible if they are made to accounts that have been designated as First-Time Homebuyer Savings Accounts by submitting the Account Holder and Designated Beneficiary Form to the Department. The Account Holder and Designated Beneficiary Form must be submitted to the Department by the due date of the Iowa individual income tax return, April 30 for calendar year filers, of the calendar year following the year in which you opened the account to the address on that form.

The Account Holder and Designated Beneficiary Form must be submitted to the Department separately from your 2023 Iowa income tax return.

Taxpayers are also required to complete an Iowa Department of Revenue annual report form and include it with their Iowa income tax return.

Complete and send a First-time Homebuyer Withdrawal Form, 41-163 to the Iowa Department of Revenue when money is withdrawn. Note: this form must be submitted to the Department within ninety (90) days of the date of any withdrawal of funds in any amount from the First-Time Homebuyer Savings Account.

Interest and earnings income from a qualified First-Time Homebuyer Savings Account are exempt from Iowa individual income tax.

k. RESERVED FOR FUTURE USE

l. RESERVED FOR FUTURE USE

m. RESERVED FOR FUTURE USE

n. RESERVED FOR FUTURE USE

o. RESERVED FOR FUTURE USE

p. Contributions to injured veterans program

An Injured Veterans Grant Program is available through the Iowa Department of Veterans Affairs. Money appropriated for these grants will be given to veterans injured in a combat zone after September 11, 2001. The grants cannot exceed $10,000 per injured veteran. The Department of Veterans Affairs may also receive money from any public or private source for purposes of providing grants to injured veterans.

A deduction is allowed for the amount paid by a taxpayer to the Department of Veterans Affairs for the purposes of providing grants to the Injured Veterans Grant Program to the extent that amount is included in federal taxable income.

q. Grants from injured veterans program

The amount of Department of Veteran Affairs grant money received by an injured veteran that is included in the veteran's federal adjusted gross income is not included in the veteran's Iowa taxable income.

r. In-home health care

To the extent included in federal taxable income, deduct any State Supplementary Assistance payments received for unskilled in-home health-related care services to a family member.

s. Iowa Veterans Trust Fund

Income from the Iowa Veterans Trust Fund for the following items can be excluded:

• Travel expenses directly related to follow-up medical care for wounded veterans and their spouses
• Unemployment assistance during a period of unemployment due to prolonged physical or mental illness or disability resulting from military service
• t. Military exemptions
  For more information see Tax Responsibilities of Servicemembers and Their Spouses. 

u. Net operating loss, Iowa

Nonresidents: Enter any Iowa-source net operating loss carryforward or carryback on your Schedule IA 126. Include the IA 124 and supporting documentation, if any.

v. Organ transplant expenses

A deduction is allowed for taxpayers for unreimbursed expenses relating to a human organ transplant to the extent the amount is included in federal taxable income. The taxpayer, while living, who donates all or part of a designated human organ can claim a deduction for unreimbursed expenses such as travel expenses, lodging expenses, and lost wages.

The deduction is limited to $10,000, and a taxpayer can only claim this deduction once.

w. Partnership income and / or S corporation income: Modifications that decreased the income (including Biodiesel Production Refund)

Report any all-source Iowa modifications reported on an IA Schedule K-1 that decrease the income.

Any biodiesel production refund received is not included as income for Iowa individual income tax purposes.

x. Segal AmeriCorps Education Award Payments

Federal Segal AmeriCorps education award payments are excluded from Iowa taxable income.

y. RESERVED FOR FUTURE USE

z. RESERVED FOR FUTURE USE

aa. Victim compensation awards

To the extent included in federal taxable income, the following items can be excluded from Iowa taxable income:

• Amounts of victim compensation awards paid under the victim compensation program administered by the Department of Justice under Iowa Code section 915.81
• Amounts of victim restitution payments received pursuant to Iowa Code chapters 910 and 915
• Amounts of damages awarded by a court, and received by a taxpayer, in a civil action filed by the victim against an offender

bb. Wages paid to certain individuals (ex-offenders & disabled)

If you operate a business, you may qualify for an additional deduction of 65% of the wages paid in the first 12 months up to a maximum deduction of $20,000 per qualifying new employee. This deduction is in addition to the wage deduction you were allowed on federal Schedule C. To qualify, the new employee(s) must be disabled or an ex-offender on parole, probation, or in a work release program. All types of businesses may qualify for this deduction for hiring qualifying ex-offenders. However, the deduction for hiring qualifying persons with disabilities is restricted to certain small businesses.

Further information is available online:

• Benefit for hiring ex-offenders
• Benefit for hiring persons with disabilities

cc. RESERVED FOR FUTURE USE

dd. Other federal adjustments

Other federal adjustments from Schedule 1, Part II, prior to the calculation of federal 1040 line 11 (federal AGI) not taken elsewhere on the IA 126.

ee. Educator expenses

Educators can deduct out-of-pocket educator expenses of up to $200 in excess of the federal deduction limitation ($300), per eligible educator. Do not include expenses already deducted from federal taxable income.

ff. RESERVED FOR FUTURE USE

gg. Nonresident Electric Utility Worker Training and Emergency Response Work Reciprocity

The income a nonresident individual earns for performing emergency response work for an electric utility in Iowa under a mutual aid agreement between Iowa and the state in which the nonresident lives is excluded from Iowa individual income tax. Income received by a nonresident individual for training by an electric utility in Iowa is also excluded.

hh. Rapid Response to State Disasters

Out-of-state businesses and individuals performing disaster or emergency-related work in Iowa are not subject to Iowa income tax or withholding. The disaster response period starts ten days before the state-declared or presidential-declared disaster and ends sixty days after the end of the declared state disaster or emergency.

ii. Iowa ABLE (Achieving a Better Life Experience) Savings Plan Trust

Contributions to a qualified ABLE savings plan trust account made during 2023, on behalf of a designated beneficiary, are deductible from Iowa individual income tax up to a maximum amount, $3,785, allowed per beneficiary per year for purposes of the Iowa ABLE savings plan trust in Iowa Code chapter 12I. Interest and earnings income from an ABLE savings plan trust account are exempt from Iowa individual income tax.

jj. RESERVED FOR FUTURE USE

kk. Broadband Infrastructure Grant

Enter the amount of a federal, state, or local grant provided to a communications service provider during the tax year, to the extent included on Federal Schedule C, line 1, if the grant was used to install broadband infrastructure that facilitates broadband service in targeted service areas at or above the download and upload speeds.

ll. Iowa Qualifying COVID-19 Grants

Enter the amount of an Iowa qualifying COVID-19 grant eligible for exclusion from Iowa income. The exclusion applies only to the extent the qualifying COVID-19 grant was included in your federal taxable income and reported as taxable income on this Iowa return. The exclusion is reported as an adjustment on Schedule 1, line 19, regardless of the line where the grant income is reported on the IA 1040. For more information on the Iowa qualifying COVID-19 grant exclusion, including qualifying grant programs, see the Department’s guidance, Qualifying COVID-19 Grants - Income and Franchise Tax Exclusion. 

mm. RESERVED FOR FUTURE USE

nn. Education Savings Account

Taxpayers who receive payments from an education savings account may exclude that from Iowa taxable income to the extent it was included in federal taxable income.

oo. Farm Tenancy Income Exclusion

Taxpayers who are retired farmers who have materially participated in a farming business for ten years in the aggregate and have held real property used in a farming business for at least ten years may elect to exclude income received from a farm tenancy agreement covering that real property. Include the IA 125 with the return.

For more information about this exclusion, see Iowa Code section 422.7(14) and Iowa Administrative Code rule 701–302.88.

pp. Student Loan Repayments by Employers

Taxpayers may deduct income resulting from the payment by an employer of the taxpayer, whether paid to the taxpayer or to a lender, of principal or interest on any qualified education loan incurred by the taxpayer.

Married Separate Filers:
When the adjustment is attributable to a specific spouse, it is taken by that spouse. When the adjustment is not attributable to any one spouse, it must be prorated based on each spouse’s taxable income.

Line 20: Total modifications to federal taxable income

Add lines 14 through 19.

Line 21: Net modifications to federal taxable income

Subtract line 20, column B from line 20, column A.

Line 22: Net Iowa Modifications

Add lines 13 and 21. Enter here and IA 1040, line 3.