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INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES, §422.5
422.5 Tax imposed — exclusions — alternative minimum tax.
1. A tax is imposed upon every resident and nonresident of the state which tax shall be
levied, collected, and paid annually upon and with respect to the entire taxable income as
defined in this division at rates as follows:
a. On all taxable income from zero through one thousand dollars, thirty-six hundredths
of one percent.
b. On all taxable income exceeding one thousand dollars but not exceeding two thousand
dollars, seventy-two hundredths of one percent.
c. On all taxable income exceeding two thousand dollars but not exceeding four thousand
dollars, two and forty-three hundredths percent.
d. On all taxable income exceeding four thousand dollars but not exceeding nine thousand
dollars, four and one-half percent.
e. On all taxable income exceeding nine thousand dollars but not exceeding fifteen
thousand dollars, six and twelve hundredths percent.
f. On all taxable income exceeding fifteen thousand dollars but not exceeding twenty
thousand dollars, six and forty-eight hundredths percent.
g. On all taxable income exceeding twenty thousand dollars but not exceeding thirty
thousand dollars, six and eight-tenths percent.
h. On all taxable income exceeding thirty thousand dollars but not exceeding forty-five
thousand dollars, seven and ninety-two hundredths percent.
i. On all taxable income exceeding forty-five thousand dollars, eight and ninety-eight
hundredths percent.
j. (1) The tax imposed upon the taxable income of a nonresident shall be computed by
reducing the amount determined pursuant to paragraphs “a” through “i” by the amounts
of nonrefundable credits under this division and by multiplying this resulting amount by a
fraction of which the nonresident’s net income allocated to Iowa, as determined in section
422.8, subsection 2, paragraph “a”, is the numerator and the nonresident’s total net income
computed under section 422.7 is the denominator. This provision also applies to individuals
who are residents of Iowa for less than the entire tax year.
(2) (a) The tax imposed upon the taxable income of a resident shareholder in an S
corporation or of an estate or trust with a situs in Iowa that is a shareholder in an S
corporation, which S corporation has in effect for the tax year an election under subchapter
S of the Internal Revenue Code and carries on business within and without the state, may be
computed by reducing the amount determined pursuant to paragraphs “a” through “i” by
the amounts of nonrefundable credits under this division and by multiplying this resulting
amount by a fraction of which the resident’s or estate’s or trust’s net income allocated to
Iowa, as determined in section 422.8, subsection 2, paragraph “b”, is the numerator and
the resident’s or estate’s or trust’s total net income computed under section 422.7 is the
denominator. If a resident shareholder, or an estate or trust with a situs in Iowa that is a
shareholder, has elected to take advantage of this subparagraph (2), and for the next tax year
elects not to take advantage of this subparagraph, the resident or estate or trust shareholder
shall not reelect to take advantage of this subparagraph for the three tax years immediately
following the first tax year for which the shareholder elected not to take advantage of this
subparagraph, unless the director consents to the reelection. This subparagraph also applies
to individuals who are residents of Iowa for less than the entire tax year.
(b) This subparagraph (2) shall not affect the amount of the taxpayer’s checkoffs under
this division, the credits from tax provided under this division, and the allocation of these
credits between spouses if the taxpayers filed separate returns or separately on combined
returns.
2. a. There is imposed upon every resident and nonresident of this state, including estates
and trusts, the greater of the tax determined in subsection 1, paragraphs “a” through “j”, or the
state alternative minimum tax equal to seventy-five percent of the maximum state individual
income tax rate for the tax year, rounded to the nearest one-tenth of one percent, of the state
alternative minimum taxable income of the taxpayer as computed under this subsection.
b. The state alternative minimum taxable income of a taxpayer is equal to the taxpayer’s
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Iowa Code 2017, Section 422.5 (35, 2)
§422.5, INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES
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state taxable income, as computed with the deductions in section 422.9, with the following
adjustments:
(1) Add items of tax preference included in federal alternative minimum taxable income
under section 57, except subsections (a)(1), (a)(2), and (a)(5), of the Internal Revenue Code,
make the adjustments included in federal alternative minimum taxable income under section
56, except subsections (a)(4), (b)(1)(C)(iii), and (d), of the Internal Revenue Code, and
add losses as required by section 58 of the Internal Revenue Code. To the extent that any
preference or adjustment is determined by an individual’s federal adjusted gross income,
the individual’s federal adjusted gross income is computed in accordance with section
422.7, subsections 39, 39A, 39B, and 53. In the case of an estate or trust, the items of tax
preference, adjustments, and losses shall be apportioned between the estate or trust and the
beneficiaries in accordance with rules prescribed by the director.
(2) Subtract the applicable exemption amount as follows:
(a) Seventeen thousand five hundred dollars for a married person who files separately or
for an estate or trust.
(b) Twenty-six thousand dollars for a single person or a head of household.
(c) Thirty-five thousand dollars for a married couple which files a joint return.
(d) The exemption amount shall be reduced, but not below zero, by an amount equal
to twenty-five percent of the amount by which the alternative minimum taxable income of
the taxpayer, computed without regard to the exemption amount in this subparagraph (2),
exceeds the following:
(i) Seventy-five thousand dollars in the case of a taxpayer described in subparagraph
division (a).
(ii) One hundred twelve thousand five hundred dollars in the case of a taxpayer described
in subparagraph division (b).
(iii) One hundred fifty thousand dollars in the case of a taxpayer described in
subparagraph division (c).
(3) In the case of a net operating loss computed for a tax year beginning after December
31, 1982, which is carried back or carried forward to the current taxable year, the net
operating loss shall be reduced by the amount of the items of tax preference arising in such
year which was taken into account in computing the net operating loss in section 422.9,
subsection 3. The deduction for a net operating loss for a tax year beginning after December
31, 1986, which is carried back or carried forward to the current taxable year shall not
exceed ninety percent of the alternative minimum taxable income determined without
regard for the net operating loss deduction.
c. The state alternative minimum tax of a taxpayer whose net capital gain deduction
includes the gain or loss from the forfeiture of an installment real estate contract, the
transfer of real or personal property securing a debt to a creditor in cancellation of that debt,
or from the sale or exchange of property as a result of actual notice of foreclosure, where
the fair market value of the taxpayer’s assets exceeds the taxpayer’s liabilities immediately
before such forfeiture, transfer, or sale or exchange, shall not be greater than such excess,
including any asset transferred within one hundred twenty days prior to such forfeiture,
transfer, or sale or exchange.
d. In the case of a resident, including a resident estate or trust, the state’s apportioned
share of the state alternative minimum tax is one hundred percent of the state alternative
minimum tax computed in this subsection 2. In the case of a resident or part-year resident
shareholder in an S corporation which has in effect for the tax year an election under
subchapter S of the Internal Revenue Code and carries on business within and without the
state, a nonresident, including a nonresident estate or trust, or an individual, estate, or trust
that is domiciled in the state for less than the entire tax year, the state’s apportioned share
of the state alternative minimum tax is the amount of tax computed under this subsection 2,
reduced by the applicable credits in sections 422.10 through 422.12 and this result multiplied
by a fraction with a numerator of the sum of state net income allocated to Iowa as determined
in section 422.8, subsection 2, paragraph “a” or “b” as applicable, plus tax preference items,
adjustments, and losses under subparagraph (1) attributable to Iowa and with a denominator
of the sum of total net income computed under section 422.7 plus all tax preference items,
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Iowa Code 2017, Section 422.5 (35, 2)
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INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES, §422.5
adjustments, and losses under subparagraph (1). In computing this fraction, those items
excludable under subparagraph (1) shall not be used in computing the tax preference items.
Married taxpayers electing to file separate returns or separately on a combined return must
allocate the minimum tax computed in this subsection in the proportion that each spouse’s
respective preference items, adjustments, and losses under subparagraph (1) bear to the
combined preference items, adjustments, and losses under subparagraph (1) of both spouses.
3. a. The tax shall not be imposed on a resident or nonresident whose net income, as
defined in section 422.7, is thirteen thousand five hundred dollars or less in the case of married
persons filing jointly or filing separately on a combined return, heads of household, and
surviving spouses or nine thousand dollars or less in the case of all other persons; but in the
event that the payment of tax under this division would reduce the net income to less than
thirteen thousand five hundred dollars or nine thousand dollars as applicable, then the tax
shall be reduced to that amount which would result in allowing the taxpayer to retain a net
income of thirteen thousand five hundred dollars or nine thousand dollars as applicable. The
preceding sentence does not apply to estates or trusts. For the purpose of this subsection, the
entire net income, including any part of the net income not allocated to Iowa, shall be taken
into account. For purposes of this subsection, net income includes all amounts of pensions
or other retirement income, except for military retirement pay excluded under section 422.7,
subsection 31A, paragraph “a”, or section 422.7, subsection 31B, paragraph “a”, received from
any source which is not taxable under this division as a result of the government pension
exclusions in section 422.7, or any other state law. If the combined net income of a husband
and wife exceeds thirteen thousand five hundred dollars, neither of them shall receive the
benefit of this subsection, and it is immaterial whether they file a joint return or separate
returns. However, if a husband and wife file separate returns and have a combined net income
of thirteen thousand five hundred dollars or less, neither spouse shall receive the benefit of
this paragraph, if one spouse has a net operating loss and elects to carry back or carry forward
the loss as provided in section 422.9, subsection 3. A person who is claimed as a dependent by
another person as defined in section 422.12 shall not receive the benefit of this subsection if
the person claiming the dependent has net income exceeding thirteen thousand five hundred
dollars or nine thousand dollars as applicable or the person claiming the dependent and the
person’s spouse have combined net income exceeding thirteen thousand five hundred dollars
or nine thousand dollars as applicable.
b. In lieu of the computation in subsection 1 or 2, or in paragraph “a” of this subsection,
if the married persons’, filing jointly or filing separately on a combined return, head of
household’s, or surviving spouse’s net income exceeds thirteen thousand five hundred
dollars, the regular tax imposed under this division shall be the lesser of the maximum state
individual income tax rate times the portion of the net income in excess of thirteen thousand
five hundred dollars or the regular tax liability computed without regard to this sentence.
Taxpayers electing to file separately shall compute the alternate tax described in this
paragraph using the total net income of the husband and wife. The alternate tax described
in this paragraph does not apply if one spouse elects to carry back or carry forward the loss
as provided in section 422.9, subsection 3.
3A. Reserved.
3B. a. The tax shall not be imposed on a resident or nonresident who is at least sixty-five
years old on December 31 of the tax year and whose net income, as defined in section 422.7,
is thirty-two thousand dollars or less in the case of married persons filing jointly or filing
separately on a combined return, heads of household, and surviving spouses or twenty-four
thousand dollars or less in the case of all other persons; but in the event that the payment of
tax under this division would reduce the net income to less than thirty-two thousand dollars
or twenty-four thousand dollars as applicable, then the tax shall be reduced to that amount
which would result in allowing the taxpayer to retain a net income of thirty-two thousand
dollars or twenty-four thousand dollars as applicable. The preceding sentence does not
apply to estates or trusts. For the purpose of this subsection, the entire net income, including
any part of the net income not allocated to Iowa, shall be taken into account. For purposes
of this subsection, net income includes all amounts of pensions or other retirement income,
except for military retirement pay excluded under section 422.7, subsection 31A, paragraph
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Iowa Code 2017, Section 422.5 (35, 2)
§422.5, INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES
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“a”, or section 422.7, subsection 31B, paragraph “a”, received from any source which is
not taxable under this division as a result of the government pension exclusions in section
422.7, or any other state law. If the combined net income of a husband and wife exceeds
thirty-two thousand dollars, neither of them shall receive the benefit of this subsection, and
it is immaterial whether they file a joint return or separate returns. However, if a husband
and wife file separate returns and have a combined net income of thirty-two thousand dollars
or less, neither spouse shall receive the benefit of this paragraph, if one spouse has a net
operating loss and elects to carry back or carry forward the loss as provided in section 422.9,
subsection 3. A person who is claimed as a dependent by another person as defined in section
422.12 shall not receive the benefit of this subsection if the person claiming the dependent
has net income exceeding thirty-two thousand dollars or twenty-four thousand dollars as
applicable or the person claiming the dependent and the person’s spouse have combined net
income exceeding thirty-two thousand dollars or twenty-four thousand dollars as applicable.
b. In lieu of the computation in subsection 1, 2, or 3, if the married persons’, filing jointly
or filing separately on a combined return, head of household’s, or surviving spouse’s net
income exceeds thirty-two thousand dollars, the regular tax imposed under this division shall
be the lesser of the maximum state individual income tax rate times the portion of the net
income in excess of thirty-two thousand dollars or the regular tax liability computed without
regard to this sentence. Taxpayers electing to file separately shall compute the alternate tax
described in this paragraph using the total net income of the husband and wife. The alternate
tax described in this paragraph does not apply if one spouse elects to carry back or carry
forward the loss as provided in section 422.9, subsection 3.
c. This subsection applies even though one spouse has not attained the age of sixty-five,
if the other spouse is at least sixty-five at the end of the tax year.
4. The tax herein levied shall be computed and collected as hereinafter provided.
5. The provisions of this division shall apply to all salaries received by federal officials or
employees of the United States government as provided for herein.
6. Upon determination of the latest cumulative inflation factor, the director shall multiply
each dollar amount set forth in subsection 1, paragraphs “a” through “i” by this cumulative
inflation factor, shall round off the resulting product to the nearest one dollar, and shall
incorporate the result into the income tax forms and instructions for each tax year.
7. The state income tax of a taxpayer whose net income includes the gain or loss from
the forfeiture of an installment real estate contract, the transfer of real or personal property
securing a debt to a creditor in cancellation of that debt, or from the sale or exchange
of property as a result of actual notice of foreclosure where the fair market value of the
taxpayer’s assets exceeds the taxpayer’s liabilities immediately before such forfeiture,
transfer, or sale or exchange shall not be greater than such excess, including any asset
transferred within one hundred twenty days prior to such forfeiture, transfer, or sale or
exchange. For purposes of this subsection, in the case of married taxpayers, except in the
case of a husband and wife who live apart at all times during the tax year, the assets and
liabilities of both spouses shall be considered in determining if the fair market value of the
taxpayer’s assets exceed the taxpayer’s liabilities.
8. In addition to the other taxes imposed by this section, a tax is imposed on the amount
of a lump sum distribution for which the taxpayer has elected under section 402(e) of the
Internal Revenue Code to be separately taxed for federal income tax purposes for the tax
year. The rate of tax is equal to twenty-five percent of the separate federal tax imposed on
the amount of the lump sum distribution. A nonresident is liable for this tax only on that
portion of the lump sum distribution allocable to Iowa. The total amount of the lump sum
distribution subject to separate federal tax shall be included in net income for purposes of
determining eligibility under subsections 3 and 3B, as applicable.
9. In the case of income derived from the sale or exchange of livestock which qualifies
under section 451(e) of the Internal Revenue Code because of drought, the taxpayer may
elect to include the income in the taxpayer’s net income in the tax year following the year of
the sale or exchange in accordance with rules prescribed by the director.
10. If an individual’s federal income tax was forgiven for a tax year under section 692
of the Internal Revenue Code, because the individual was killed while serving in an area
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Iowa Code 2017, Section 422.5 (35, 2)
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INDIVIDUAL INCOME, CORPORATE, AND FRANCHISE TAXES, §422.5
designated by the president of the United States or the United States Congress as a combat
zone, the individual was missing in action and presumed dead, or the individual was killed
outside the United States in a terroristic or military action while the individual was a military
or civilian employee of the United States, the individual’s Iowa income tax is also forgiven
for the same tax year.
11. If a taxpayer repays in the current tax year certain amounts of income that were
subject to tax under this division in a prior year and a tax benefit would be allowed under
similar circumstances under section 1341 of the Internal Revenue Code, a tax benefit shall be
allowed on the Iowa return. The tax benefit shall be the reduced tax for the current tax year
due to the deduction for the repaid income or the reduction in tax for the prior year or years
due to exclusion of the repaid income. The reduction in tax shall qualify as a refundable tax
credit on the return for the current year pursuant to rules prescribed by the director.
[C35, §6943-f5; C39, §6943.037; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §422.5; 81
Acts, ch 132, §3; 82 Acts, ch 1023, §2, 31, ch 1064, §1, 2, ch 1226, §1, 2, 6]
83 Acts, ch 101, §86; 83 Acts, ch 179, §3, 20, 22; 85 Acts, ch 243, §1, 2; 86 Acts, ch 1213, §9;
86 Acts, ch 1232, §1; 86 Acts, ch 1236, §3, 4; 87 Acts, ch 214, §2; 87 Acts, 1st Ex, ch 1, §2; 87
Acts, 2nd Ex, ch 1, §2, 3; 88 Acts, ch 1028, §5 – 11; 89 Acts, ch 228, §4, 5; 89 Acts, ch 251, §11;
89 Acts, ch 268, §2, 3; 89 Acts, ch 296, §41; 91 Acts, ch 159, §7; 91 Acts, ch 196, §1; 92 Acts,
2nd Ex, ch 1001, §217, 218, 224; 96 Acts, ch 1166, §3, 4; 96 Acts, ch 1197, §14, 15, 18; 96 Acts,
ch 1219, §27; 97 Acts, ch 8, §1, 2; 97 Acts, ch 111, §2 – 4, 7, 8; 97 Acts, ch 158, §11, 49; 99 Acts,
ch 151, §4, 89; 2003 Acts, ch 139, §4; 2006 Acts, ch 1112, §1 – 3, 5; 2006 Acts, ch 1158, §8 – 10;
2007 Acts, ch 126, §65, 112, 116; 2009 Acts, ch 41, §263; 2009 Acts, ch 133, §135; 2011 Acts,
ch 41, §17, 23, 24; 2012 Acts, ch 1021, §72; 2013 Acts, ch 140, §120, 123, 124; 2014 Acts, ch
1116, §1, 2, 5
Referred to in §2.48, §68A.102, §257.21, §422.6, §422.8, §422.10, §422.11B, §422.13, §422.16, §422.21, §422D.2
2013 amendment to subsection 1, paragraph j, subparagraph (2) takes effect June 20, 2013, and applies retroactively to January 1, 2013,
for tax years beginning on or after that date; 2013 Acts, ch 140, §123, 124
2014 amendments to subsection 3, paragraph a and subsection 3B, paragraph a apply retroactively to January 1, 2014, for tax years
beginning on or after that date; 2014 Acts, ch 1116, §5
For provisions relating to the calculation of state alternative minimum taxable income in light of the disallowance of additional first-year
depreciation under section 168(k) of the Internal Revenue Code for tax years beginning during the 2015 calendar year, see 2016 Acts, ch
1007, §3 – 5
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Iowa Code 2017, Section 422.5 (35, 2)
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