Form 130 is an Iowa income tax form used by taxpayers who live in Iowa and who had income taxed by another state.
Form 130 determines the amount of tax credit the taxpayer gets in Iowa for the taxes paid to the other state.
The most important part of Form 130 is to remember that the credit is NOT based on the amount of withholding paid to the other state. It’s based on how much tax the taxpayer actually was liable for in the other state.
The credit is limited to the lesser of:
- The tax liability to the other state, or
- A percentage of your Iowa tax liability, based on the ratio of income from Iowa vs. income from the other state.
I’ll go into the calculation of the credit in a different blog post.