Retirement exclusion on 2025 IA 1040 incorrect?

[barbnich]

This is copied from 2025 Iowa 1040 Expanded Instructions for Schedule 1, Line 7, regarding the modification to subtract retirement income from federal taxable income:

Note:  Distributions from the following plans are not eligible for the retirement income exclusion:

(1) Nonqualified deferred compensation plans  
(2) Nonqualified annuities - Most nonqualified annuity distributions will report a code of “D” in box 7 on federal form 1099-R

The program includes all 1099-R distributions, regardless of whether they are IRA Code 7 (qualified) distributions, or whether they are non-IRA Code D (non-qualified) distributions.  

I'm thinking the non-qualified distributions should not be included.  I used override to change the amount, but the program has changed it back again.  In the end, it makes no difference to my return, as the Iowa taxable income is a negative regardless of whether or not the non-qualified annuity income is included on Schedule 1, Line 7.

Am I missing something?

Barb

[BillM223]

No, you are not missing something. I have confirmed this issue.

You have a workaround - On the screen "Iowa Retirement Income", you can enter the distribution with the code 7D (or other not eligible plan) in the line "Pensions and Annuities Not Reportable to Iowa". 

You will note in the Learn More that this line is actually for something else, but entering your ineligible distribution here will work just fine.

[barbnich]

Thanks for your reply, and work-around.  I used an "override" so that the return was correct, but it would be nice if the program would automatically do the calculation correctly.