Who May Exclude Disability?
If you retired on disability and reported your disability income in full on your federal income tax return, you may qualify to exclude a portion of your disability income from Iowa tax.
You may qualify for the exclusion if you meet all of these tests:
• You received disability pay and your federal adjusted gross income (AGI) is below $20,200, or married taxpayers’ combined AGI is below $25,400 if both spouses are retired, under 65, and disabled.
• You were not yet 65 when your tax year ended.
• You retired on disability and were permanently and totally disabled when you retired.
• On January 1st of this tax year, you had not yet reached the age when your employer’s retirement program would have required you to retire.
• You took the exclusion in a prior year and did not elect to treat your disability income as a pension for federal purposes.
• If you were married at the end of the tax year, you must have filed a joint federal income tax return for the tax year, unless you did not live with your spouse at any time during the year.
If you meet all of the above tests, you can take the exclusion until the earliest of the following dates:
1) The first day of the tax year in which you turn 65, or
2) The first day of the tax year for which you choose to treat your disability income as a pension, or
3) The day you reach the age when your employer’s retirement program would have required you to retire.