Okay, so there are big changes in federal taxation across the board. One might assume Iowa would go along with the majority of the changes. That assumption would be incorrect, at least for 2018 taxes filed in 2019. Over the course of several years, Iowa will come into compliance with most of the federal rules, but the differences in 2018 are stark.
Iowa has a page devoted to the phase-in of compliance with the federal changes here. There is a hodge-podge of pdf files to download that detail the differences, and their phase-in dates. Here’s a brief list of areas where Iowa is complying with the federal changes, and where Iowa differs:
Areas of compliance
- Section 529 plans can be used for K-12 tuition, in addition to college tuition and costs
- Individuals over age 70 1/2 can direct their IRAs to make charitable contributions tax-free
- Teachers may deduct up to $250 in unreimbursed classroom supply expenses ‘above the line‘
Areas of non-compliance
- Allowed itemized deductions for Iowa are essentially the same as they were in 2017. (10% floor on medical expense, no SALT tax limitation, 2% miscellaneous deductions still allowed, etc.) See this pdf for information. Only for 2018.
- Iowa retains the Domestic Production Activity Deduction for all taxpayers in 2018 only. No compliance with the new Section 199A deduction in 2018.
- Still, no bonus depreciation. Iowa’s Section 179 (fast write-off of equipment) limits are much lower than federal for 2018, coming into compliance by 2020 in a phased-in approach.
- Like-kind exchange treatment is mandatory for all taxpayers in 2018, and a choice for individuals in 2019.
Iowa has created new worksheets, including an aptly-named ‘2018 Nonconformity Adjustments Worksheet‘, which will be revised in future years as Iowa phases in conformity with most of the new federal provisions over the next few years.
Will all of this added complexity cause your tax preparation fee to rise? For affected taxpayers, you know the answer.