Iowa requires people to claim federal tax refunds as taxable income on Iowa tax returns.
If you’re an Iowa resident all year, it’s simple: your federal tax refund is likely taxable in Iowa. (Though not always the whole thing.)
The reporting is a little more complicated if you moved to or from Iowa during the year, or if you’re a non-resident required to file an Iowa tax return.
Moved To Iowa
In the first year you move to Iowa, you DO NOT report your federal tax refund on your first Iowa tax return.
Example: You move to Iowa in 2014. On your first Iowa tax return for 2014, you will not report any refunds on the return.
Move Out Of Iowa
In the year you move out of Iowa, you WILL report your federal tax refund on your final Iowa tax return.
If you’re a non-resident, the reporting depends on if you filed an Iowa tax return in the prior year.
If you didn’t file an Iowa tax return in the prior year, you don’t report any refunds on your current Iowa return. If you did file an Iowa tax return in the prior year, then you’d need to report your refund on your current Iowa return.
What If You Didn’t Get a Federal Refund?
If you owed the IRS instead of getting a refund, Iowa allows you to take a deduction for the additional tax paid.
The rules for taking the deduction for additional taxes paid are the same as outlined above for reporting refunds.
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