On February 4, a proposed coupling bill, Senate Study Bill 3107, was introduced in the Iowa Senate.
#FILE EXTENSION 2016 FED AND STATE SOFTWARE#
Although most problems have been resolved, early versions of popular software were not correctly calculating the Iowa deduction. Practitioners must also double check that their software is calculating the Iowa tax correctly. The noncoupling of this federal provisions alone will result in thousands of dollars of additional tax liability for farmers or small businesses that made large purchases in 2015. This is because the federal law allows a $500,000 deduction with a $2,000,000 annual dollar threshold. If Iowa were to couple with federal law, the farmer would be entitled to deduct the entire amount of the purchase from his income. In other words, a farmer with a 2015 purchase of $225,000 in equipment is currently entitled to no Iowa §179 deduction. This means not only that the deduction is limited to $25,000, but also that the deduction begins a dollar-for-dollar phaseout for purchases exceeding the $200,000 limit. No Section 179 Enhanced DeductionĬurrently, Iowa has a $25,000 §179 deduction with only a $200,000 annual dollar threshold. The Iowa Governor has now voiced support for a one-year coupling bill. While 2015 coupling appeared dead just a week ago, it now appears there is a solid chance for a change in Iowa law.
Iowa did not, however, adopt the 2014 federal bonus depreciation provisions. For the 2014 tax year, Iowa was coupled with federal tax law with respect to the enhanced IRC § 179 deduction and most other federal provisions. Consequently, none of the 2015 federal tax extenders apply to Iowa tax returns. While these changes are in the books for the 2015 tax year with respect to federal tax returns, Iowa has not enacted legislation to apply these changes to Iowa tax returns. Also included in this extenders package was a permanent extension of a number of other important tax breaks, including a reduced five-year period during which S Corporations must recognize built-in gain, a $250 deduction for teachers who purchase supplies for their K-12 classrooms, and the option to allow taxpayers to claim state and local sales tax instead of state and local income tax as an itemized deduction. In the PATH Act (see our summary article of this law here), Congress permanently extended a $500,000 enhanced IRC § 179 deduction and provided for 50% bonus depreciation that would be phased out over a five-year period. PATH Act ProvisionsĪs most readers are aware, Congress permanently extended several key tax breaks at the end of 2015. The Department has also confirmed that this extension only applies to farmers' 1040 returns. Since April 30 is a Saturday, the Iowa Department of Revenue has confirmed that this means an actual deadline of May 2. The Department has announced that the deadline to pay these taxes, without being subject to an underpayment of estimated taxes payment, is now April 30, as opposed to March 1. Late on February 27, the Iowa Department of Revenue announced that, at the direction of Governor Branstad, it was delaying the deadline for farmers to file and pay their individual 2015 tax returns. If it does, it looks like Governor Branstad will sign it. Farmers have been offered an extension while we wait to see if a coupling bill emerges from the Legislature.
It is looking much more promising that the Iowa Legislature will eventually decide to retroactively integrate federal tax extenders from the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) into Iowa law for the 2015 tax year.
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