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On March 15, 2019 Governor Reynolds signed into law 2019 Iowa Acts, Senate File 220, which retroactively increased the Iowa section 179 deduction limitations for tax year 2018 for entities filing as C-Corporations or S-Corporations for income tax purposes, and for financial institutions subject to the Iowa franchise tax.
Tax reform legislation passed by the Iowa legislature last year raised the tax year 2018 Iowa section 179 deduction limitation to $70,000 with a phaseout limitation of $280,000 for individual income taxpayers, and by extension, entities that file as partnerships for income tax purposes, and provided these same taxpayers with a special election (commonly referred to as the “passthrough fix”) that under certain circumstances allowed owners of passthrough entities to avoid permanently losing a portion of the deduction passed through to them. Last year’s tax reform legislation did not extend this increased deduction allowance or the passthrough fix to entities filing as C-Corporations or S-Corporations, or to financial institutions subject to the franchise tax. Instead these entities remained subject to the $25,000 deduction limitation and $200,000 phaseout limitation that applied to all taxpayers in tax years 2016 and 2017.
Under Senate File 220, the Iowa section 179 deduction limitation for tax year 2018 is now $70,000, with a $280,000 phaseout limitation for all taxpayers claiming the federal deduction, and all eligible taxpayers may take advantage of the passthrough fix in tax year 2018. The Iowa 179 deduction limitation for tax year 2019 remains $100,000 with a $400,000 phaseout for all taxpayers. Iowa will fully conform to the federal 179 deduction amounts for all taxpayers beginning in tax year 2020.
C-Corporations, S-Corporations, and financial institutions which already filed 2018 Iowa tax returns reflecting the lower ($25,000) limitation must file amended returns reflecting the new, higher deduction, unless:
- The entity’s Iowa 179 deduction would be fully phased out even under the higher limitations; or
- The entity’s total allowable 179 deduction under the old limits was $25,000 or less and was not partially phased out.
S-Corporations required to amend Iowa returns may need to issue amended Iowa K-1s to reflect the change. Shareholders receiving amended K-1s are required to amend their own Iowa returns accordingly.
The Department of Revenue has updated the 2018 IA 4562 A/B Iowa Depreciation Adjustment Schedule to reflect the changes made by Senate File 220. More detailed guidance on these changes can be found on the tax reform guidance page of the Department's website.
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The statutory mission of the Iowa Department of Revenue is to serve
Iowans and support state government by collecting all taxes required by
law, but no more.
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