Am I not required to file an Iowa income tax return and are exempt from Iowa tax if my IA126-line 25 is less than $1,000 and I am not subject to Iowa lump-sum tax?

[AmyC · Accepted solution]

Yes. You are not required to file an IA126.

According to Who Must File an Iowa return:

You must file an Iowa return if...

... you were a resident or part-year resident of Iowa in 2024 and meet any of the following requirements. Nonresidents, see items f and g.

The following items must be added for the taxpayer (and spouse, if applicable) to determine if there is a filing requirement:

•  Iowa taxable income from IA 1040, line 4
•  Standard deduction or itemized deductions from IA 1040, line 1d not to exceed the amount included in IA 1040, line 2.
•  Personal exemption allowed for federal purposes. ($0 for 2024)
•  Qualified business income deduction from IA 1040, line 1e
•  Any amount of lump-sum tax distributions of taxable income
• Carryover of net operating loss claimed on the IA 1040 Schedule 1, line 17

Note to married couples filing jointly: Incomes of both spouses must be included when determining who must file.

a. You are using filing status single or married filing separately and the total of the lines listed above is more than $9,000. ($24,000 if 65 or older on 12/31/24)

b. You are using filing status married filing jointly, head of household, or qualifying surviving spouse, and the total of the lines listed above is more than $13,500. ($32,000 if you or your spouse was 65 or older on 12/31/24)

c. You were claimed as a dependent on another person’s Iowa return and had Iowa taxable income (IA 1040, line 4) of $5,000 or more. Note: You do not need to add the items listed above to IA 1040, line 4 in determination of this filing requirement.

d. You were in the military service with Iowa shown as your legal residence even though stationed outside of Iowa unless you are below the income thresholds above. For information about military spouses, see Tax Responsibilities of Military Personnel.

e. You were subject to Iowa lump-sum tax.

f. You were a nonresident or part-year resident and your Iowa-source net income IA 126, line 25 was $1,000 or more, unless below the income thresholds above. In the case of married nonresidents, the spouses' combined income is used to determine if their income is high enough to require them to file an Iowa return. To understand “Iowa-source income,” see the instructions for IA 126, lines 1 through 25. Common examples of Iowa-source income include:

• Wages earned in Iowa
• Income from Iowa property
  • Rental income
  • Capital gain on the sale of property
  • Farming income from Iowa farmland activities and land rent?
• Self-employment income earned while working in Iowa
• Iowa unemployment benefits
• Iowa gambling winnings
• Income from an IA K-1 issued by  pass-through entities, such as partnerships and S-corporations

g. You were a nonresident or part-year resident and subject to Iowa lump-sum tax (even if Iowa-source net income is less than $1,000).

[virii19790829]

Hi @AmyC ,

Thank you for your response. To further clarify my understanding, I’ve outlined more details below:

1. We are married nonresidents in Iowa for the 2024 tax year and sold our home in 2024. Our only Iowa-source income was the capital gain from the sale.
2. The capital gain was 100% eligible for exclusion and is not required to be reported to the IRS.
3. Based on these facts, our Iowa-source net income (IA 126, line 25) was zero.

Given these information, are we required to file an Iowa return for 2024 (IA 1040 / IA126)? We are reviewing our TurboTax results and trying to finalize our return, but it indicates that we need to file both IA 1040 and IA 126. We’re a bit confused and would appreciate your guidance. Thanks!

[ThomasM125 · Accepted solution]

You wouldn't need to file an Iowa return based on what you posted, provided you weren't required to report the house sale on your federal return. Your Iowa return was likely transferred in from the previous year into your 2024 TurboTax, that may be why you are instructed to complete it.

[virii19790829]

@ThomasM125 Thank you so much! That helps a lot.