Iowa Tax Changes – Robert Bell, CPA, Auditor

Senate File 619 (SF 619) was signed into law on June 16, 2021 – this legislation makes a significant number of changes to Iowa tax law. Historically, Iowa has decoupled from federal bonus deprecation as the statutory definition of “net income” under Iowa Code required adding back federal bonus deprecation. SF 619 now conforms Iowa to federal rules concerning bonus depreciation effective for assets placed in service 1.1.2021 or after by removing the adjustment to Iowa net income.

Further, Iowa Code limited the amount of business interest that could be deducted in computing net income – commonly known as 163(j) under federal rules. SF 619 decouples Iowa from the federal rules concerning business interest expense limitation for individual and corporate taxpayers for tax years beginning on or after January 1, 2021; thus removing the limitation.

Finally, starting in tax year 2020 (fiscal year filers with 2021 year-ends), Iowa fully conforms to the federal limits under IRC section 179. The election to expense qualifying property under section 179 allows taxpayers to deduct the cost of qualifying property used in a trade or business in the year the property was placed in service rather than depreciating the asset over a number of years. For tax year 2020 the 179 limit is $1,040,000 and the phase out limit begins at $2,590,000.