HF 1020 (LSB 1908HV (1) 91)

HOUSE FILE 1020

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HF 962)

A BILL FOR

An Act modifying the child and dependent care credit available against the individual income tax, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.12C, subsection 1, Code 2025, is amended to read as follows:
   1.  The taxes imposed under this subchapter, less the amounts of nonrefundable credits allowed under this subchapter, shall be reduced by a child and dependent care credit equal to the following percentages of the federal child and dependent care credit provided in section 21 of the Internal Revenue Code, without regard to whether or not the federal credit was limited by the taxpayer’s federal tax liability:
   a.  For a taxpayer with net income of less than ten thousand dollars, seventy-five percent.
   b.  For a taxpayer with net income of ten thousand dollars or more but less than twenty thousand dollars, sixty-five percent.
   c.  For a taxpayer with net income of twenty thousand dollars or more but less than twenty-five thousand dollars, fifty-five percent.
   d.  For a taxpayer with net income of twenty-five thousand dollars or more but less than thirty-five thousand dollars, fifty percent.
   e.  For a taxpayer with net income of thirty-five thousand dollars or more but less than forty thousand dollars, forty percent.
   f.  For a taxpayer with net income of forty thousand dollars or more but less than ninety thousand dollars, thirty percent.
   g.  For a taxpayer with net income of ninety thousand dollars or more, zero percent.
    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2025, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the Iowa child and dependent care credit available against the individual income tax.
   The Iowa child and dependent care credit is a refundable credit calculated as a percentage of the federal child and dependent care credit, depending on the Iowa net income of the taxpayer. Currently, there are seven graduated Iowa net income thresholds used to calculate the credit. The bill reduces the number of Iowa net income thresholds from seven thresholds to four thresholds, and removes the maximum Iowa net income threshold amount used by the taxpayer to calculate the Iowa child and dependent care tax credit. By removing the maximum Iowa net income threshold amount for eligibility purposes ($90,000), any taxpayer with Iowa net income equal to or exceeding $25,000 is eligible to use 50 percent of the federal child and dependent care credit as a refundable credit against the Iowa individual income tax, regardless of whether the taxpayer’s federal credit is limited by the taxpayer’s federal tax liability.
   The bill applies retroactively to tax years beginning on or after January 1, 2025.