Related Topics:

Corporation Income Tax
Individual Income Tax

Iowa employers who meet specific criteria are allowed an additional deduction on their Iowa income tax returns for hiring ex-offenders.

See Department Rules and Regulations Iowa Administrative Code 701-302.21.

Benefit for Hiring Ex-offenders

  • Iowa income tax deduction for 65% of the wages paid in the first 12 months of employment
  • Maximum deduction of $20,000 per employee
  • In addition to the Targeted Jobs Tax Credit

Ex-offender is Someone Who:

  • Has been convicted of a felony in Iowa or any other state or the District of Columbia or
  • Is on parole or
  • Is on probation for an offense other than a simple misdemeanor or
  • Is in a work release program or
  • Is still incarcerated or
  • Qualifies under the interstate probation and parole compact or
  • Is certified as an economically disadvantaged ex-offender for the targeted jobs tax credit

Qualifying Ex-offender

  • Can be any age; no age restrictions
  • Must be a new hire; a current employee who becomes an ex-offender does not qualify
  • May hold more than one job; each employer may take the deduction
  • Can be employed full or part time
  • Must pass the business’ probationary period, which is six months if an employer does not have a written policy
  • Cannot be hired to replace another employee who was terminated within the previous 12 months, unless the termination was for misconduct in connection with employment. If the employee left voluntarily, the ex-offender qualifies.

Claiming the Deduction

The employer claims the deduction on the Iowa 1040 individual income tax return under "other adjustments" or on the Iowa corporation income tax return under "other reductions."

The employer must submit a separate sheet with the tax return with the following information: the employee’s name, address, Social Security Number, date of hiring, and total wages paid.

Claiming the Maximum Amount

If 65% of the employee’s wages does not meet the $20,000 maximum in a single tax year, the balance may be claimed the following year as long as the employee worked fewer than 12 months the first year.

Amending Returns

If a business employed an ex-offender before learning about this benefit, the employer may amend income tax returns to include the deduction. Returns can be amended within three years from the due date of the return.