On March 1, 2022, Governor Kim Reynolds signed into law House File 2317. This bill, in part, creates or modifies the following individual income tax provisions:
- Provides one irrevocable election for employee-owners to exclude from state income tax the net capital gain from the sale of stock from one qualified employee-owned corporation. The stock can be sold all at once or over a fifteen-year period.
- Excludes from Iowa income tax certain farm lease payments received by retired farmers who are 55 years of age or older or who are disabled.
- Excludes from Iowa income tax certain capital gains of retired farmers who are 55 years of age or older or who are disabled.
- Reduces over a three-year period the highest Iowa individual income tax rate, then converts to a flat tax rate of 3.9% for tax years 2026 and later.
- Excludes from Iowa income tax retirement income for individuals who are 55 years of age or older or who are disabled and provides the same exclusion to surviving spouses or other qualifying survivors who receive retirement income as a result of the death of an individual who would have qualified for the exclusion.
The provisions listed above apply to tax years beginning on or after January 1, 2023, and some of the changes are phased in over a number of years. This means that HF 2317 does not impact your tax returns due on May 2, 2022 or May 1, 2023. The Department will adopt rules and publish guidance related to these provisions in the future.