Iowa allows its taxpayers to claim the Earned Income Credit but it can only equal 15% of the Earned Income Credit claimed on your Federal return for 2015. Almost unnoticed as Iowans file their state income taxes today is that many thousands of families are benefiting from a newly expanded state Earned Income Tax Credit (EITC).
Iowa Earned Income Tax Credit
Iowa legislators last year passed and Governor Branstad signed an expansion of the working family credit, doubling it from 7 percent of the federal EITC to 14 percent for 2013, and bumping it to 15 percent for this year. The increase was barely mentioned by the Governor when he signed it as part of a larger package of tax changes. Yet, as we noted recently — the boost is “arguably the most important legislation he signed last year.
What is the Iowa Earned Income Tax Credit?
The Iowa Earned Income Tax Credit (EITC), introduced in 1989, allowed taxpayers who claimed the federal EITC to claim a nonrefundable credit equal to 5 percent of the federal EITC. In 1991, the Legislature increased the credit rate to 6.5 percent of the federal EITC. In 2007, the credit rate was raised to 7 percent of the federal EITC and was made refundable.
How much is the Iowa Earned Income Tax Credit?
7 percent of federal EITC through tax year 2012, 14 percent in tax year 2013, and 15 percent thereafter. During the 2007 legislative session, the state EITC was expanded from 6.5 percent to 7 percent and made refundable. Making the credit refundable allowed an additional 650,000 Iowan households to claim the state credit.
Who qualifies for the Iowa Earned Income Tax Credit (Iowa EITC)?
If you qualify for the low income exemption as explained in the instructions for line 26 and are filing an Iowa return only to claim a refund of the Iowa EITC, enter the words “low income exemption” in the area to the left of your net income figure on line 26. Enter zero on lines 53, 54, and 56. Enter the amount of your Iowa EITC on lines 60, 62, 67, 68, 69, and 70.