Just when you thought it was safe to attempt to do your federal tax return for 2018, there are still plenty of sharks in the form of state of Iowa changes to be aware of for 2018 and going forward into 2019 as well.
Iowa continues to not allow the Research and Development Credit for 2018 This credit was actually repealed for 2017 and continues now to be only allowed in certain cases. Mainly only allowed for industries involved in manufacturing, life sciences, software engineering and aviation and aerospace.
Iowa will allow the domestic production activities deduction for 2018 but will not couple with the Federal Section 199A Deduction. Then in 2019 it will do away with the DPAD deduction and start to phase in the Federal 199A deduction.
Iowa continues to not allow any bonus depreciation in 2018 but has increased its Section 179 deduction limit to $70,000. It had been $25,000 for the past few years.
Iowa will not limit the amount of property taxes you can take as an itemized deduction in 2018. For Federal purposes you are limited to $10,000 for state and local taxes. As of now, this is not capped for Iowa purposes going into 2019.
Just a few other differences to be aware of for 2018 include certain deductions that Iowa will allow that are not allowed on your Federal return. These include miscellaneous itemized deductions above 2% of adjusted gross income, moving expenses, and home equity loan interest. However, for 2019, Iowa does not allow the deductions just mentioned for miscellaneous itemized deductions, moving expenses and home equity loan interest.
It is safe to say as we navigate through the next couple of years that our tax returns will show many differences between Federal and State, so it may take a review of each line item of each return to ensure accuracy of the returns.