SF 126 – Internal Revenue Code update (coupling bill)
FLOOR ACTION:
SF 126 updates the Iowa Internal Revenue Code to “couple” with federal tax law changes that were included in the federal Tax Increase Prevention Act of 2014. Some of these changes to state tax law for tax year 2014 include extending:
- Deduction of up to $250 for out-of-pocket expenses by teachers.
- Up to $4,000 tuition and fees deduction for higher education expenses.
- Choice to deduct state sales and use taxes in lieu of the standard deduction.
- Some tax-free IRA contributions to eligible charities.
- Allowing small businesses to expense, rather than depreciate, the first $500,000 of equipment costs, known as Section 179 expensing.
- Premiums for mortgage insurance deductible as qualified residence interest.
- Enhanced charitable deduction for contributions of food inventory.
- Basis adjustment to stock of S corporations making charitable contributions.
- Work opportunity tax credit, allowed as an adjustment to Iowa gross income.
One change to federal legislation that is not included in SSB 1059 is the provision to provide a first-year depreciation allowance, known as 50 percent bonus depreciation. Iowa has not coupled its tax code to match this provision since it was included in the federal tax code in 2008, and it is not proposed to be offered now. Businesses will instead be able to use standard depreciation schedules for these qualified expenses. [2/4: 49-0 (Zaun excused)]