The Iowa Earned Income Tax Credit (EITC) is a refundable state credit available to eligible Iowa taxpayers who qualify for and claim the federal Earned Income Tax Credit. For tax years 2014 and later, the Iowa EITC is calculated as a percentage of the federal EITC amount.
Eligibility and Calculation
- Credit Amount: The Iowa EITC equals 15% of the federal Earned Income Tax Credit claimed on the federal return.
- Reporting: The credit is claimed on Form IA 1040, using the designated line for the Iowa Earned Income Tax Credit as shown in the current Iowa IA 1040 instructions.
- Residency Rules:
- Full-year Iowa residents claim the credit based on the full federal EITC amount.
- Nonresidents and part-year residents may claim a prorated Iowa EITC based on Iowa-source income as determined under Iowa instructions and applicable allocation rules.
Refundable and Filing Requirements
- The Iowa Earned Income Tax Credit is refundable, meaning it may increase a taxpayer’s refund even if the taxpayer has no Iowa income tax liability.
- A taxpayer must file an Iowa income tax return to claim the Iowa Earned Income Tax Credit. Taxpayers who are not otherwise required to file may file an Iowa return to claim the refundable credit if they meet all Iowa EITC eligibility requirements.
Additional Notes
- The Iowa EITC does not have a separate Iowa eligibility calculation. Eligibility is based on qualifying for the federal Earned Income Tax Credit, including federal income limitations and other federal EITC requirements.
- The Iowa EITC is calculated as 15% of the federal Earned Income Tax Credit amount allowed on the federal return.
- For nonresidents and part-year residents, the Iowa EITC must be adjusted using the Iowa income percentage calculated under Iowa allocation rules, as provided in the current IA 1040 instructions and Form IA 126 requirements.
Source:
Form IA 1040
Disclaimer: Always verify details with the most current Federal or State Department of Revenue Forms and Instructions. For complex tax situations, consult a CPA or tax attorney.