If you or your spouse receive a pension, an annuity, a self-employed retirement plan, deferred compensation, IRA distribution, or other retirement plan benefits, you may be eligible to exclude from Iowa income tax part or all of the retirement income that is taxable on your federal return. The Roth conversion income, included in net income, is eligible for this exclusion.
Social Security benefits, railroad retirement benefits, and military retirement pay are not included. Since railroad retirement benefits and military retirement pay are not reported on line 9 of the IA 1040, an exclusion does not apply on line 21. However, if you are receiving military retirement pay, you may still be eligible to exclude other non-military pension income.
The exclusion is up to $6,000 for individuals who file status 1, 5, or 6 and up to $12,000 for married taxpayers who file status 2, 3, or 4. (If, for example, an individual has $5,000 in pension / retirement income, the exclusion will be the actual $5,000, not the maximum of $6,000.)
To take this exclusion the pensioner or retirement income recipient must meet one of the following conditions:
- 55 years of age or older on December 31, 2021, or
- disabled, or
- a surviving spouse or a survivor having an insurable interest in an individual who has qualified for the exclusion in 2021 on the basis of age or disability. A survivor other than the surviving spouse is considered to have an "insurable interest" if the survivor is a son, daughter, mother, or father of the annuitant or pensioner.