HF 2525 (LSB 5973YH (2) 91)

HOUSE FILE 2525

BY  WULF

A BILL FOR

An Act creating tax deductions against the individual income tax for veterinarians by providing a deduction for income resulting from rural veterinarian loan repayments and by allowing a deduction for the amount of interest paid on student loans for attendance at a veterinary school, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  46.  a.  (1)  Subtract, to the extent included, income resulting from loan repayments received under a program agreement entered into by a taxpayer who is a loan repayment recipient and the Iowa college student aid commission pursuant to section 256.226, if the taxpayer fulfills the obligation to engage in the practice of veterinary medicine according to terms of that section and the program agreement.
   (2)  The deduction in subparagraph (1) shall not exceed the following limits:
   (a)  For any tax year, fifteen thousand dollars.
   (b)  For the aggregate of all tax years, sixty thousand dollars.
   (c)  In any case, the amount of the outstanding eligible loan.
   b.  (1)  Subtract, to the extent not already excluded, the amount of interest paid by a veterinarian during the tax year on a qualified education loan for attendance at an accredited or approved college of veterinary medicine, if the veterinarian practiced veterinary medicine in the state during the tax year.
   (2)  The deduction in this paragraph “b” shall not be allowed when the taxpayer is receiving a loan repayment pursuant to section 256.226 in the same tax year.
   (3)  As used in this paragraph “b”:
   (a)  “Accredited or approved college of veterinary medicine” means the same as defined in section 169.3.
   (b)  “Qualified education loan” means the same as defined in section 221 of the Internal Revenue Code.
   (c)  “Veterinarian” means the same as defined in section 169.3.
   (d)  “Veterinary medicine” means the same as defined in section 169.3.
   c.  The department shall adopt rules pursuant to chapter 17A to administer this subsection including the number of days of veterinarian practice required in this state in order to be eligible for the deduction under paragraph “b”.
    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2026, 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 creates two separate tax deductions against the individual income tax for veterinarians by providing a deduction for income resulting from rural veterinarian loan repayments and by allowing a deduction for the amount of interest paid on student loans for attendance at a veterinary school.
   DEDUCTION FOR RURAL VETERINARIAN LOAN REPAYMENTS. The bill allows a licensed veterinarian participating in the rural veterinarian loan repayment program to deduct net income attributable to loan payments received under the program, subject to the restrictions provided in the program. The amount subject to the exclusion cannot exceed $15,000 per tax year, and an aggregate of $60,000 for all tax years. However, in any case, the excluded amount cannot exceed the amount of the outstanding eligible loan.
   DEDUCTION FOR INTEREST AMOUNT PAID ON STUDENT LOANS. Under current law for federal income tax purposes and therefore for Iowa income tax purposes, an individual is allowed to deduct up to $2,500 of interest paid on a qualified education loan (section 221 of the Internal Revenue Code). However, this deduction is gradually phased out based upon the taxpayer’s income level.
   The bill allows a veterinarian to deduct, for Iowa income tax purposes, the total amount of interest paid during the tax year on a qualified education loan for attendance at an accredited or approved college of veterinary medicine, if the veterinarian practiced veterinary medicine in the state during the tax year. The deduction for the interest paid during the tax year is not allowed if the veterinarian is receiving a loan repayment under the rural education loan repayment program in the same tax year.
   RULES. The department of revenue is required to adopt rules to administer the bill including establishing the number of days of veterinarian practice required in this state in order to be eligible for the deduction for the amounts paid for student loan interest.
   APPLICABILITY. The bill applies retroactively to tax years beginning on or after January 1, 2026.