Iowa Taxable income
Plus:* Applicable Adjustments and **Tax Preference Items (from Form lA 6251)
Subtotal
Less:***Applicable Exemption amount
Minimum Taxable income
For tax periods ending on or after September 10, 2001, any federal adjustments or tax preference items that are determined based on a percentage of taxpayer's federal adjusted gross income may have to be adjusted for Iowa alternative minimum tax purposes. These adjustments and preferences for Iowa alternative minimum tax purposes are based on federal adjusted gross income as adjusted by the disallowance of the additional first-year depreciation allowance authorized in Section 168(k) of the Internal Revenue Code as described in rule 701-40.60(422).
The following two examples illustrate how the minimum tax is computed for tax years beginning on or after January I, 1987:
Example 1. Taxpayers A had an Iowa income tax liability of $9,375 from a taxable income of $100,000 in 1987. The A's were filing a joint return and had tax preferences of $60,000 from an appreciated property charitable deduction. The A's minimum tax liability is shown below:
Iowa Taxable income | $100,000 | |||
Plus: | Tax Preference Items and Adjustments | 60,000 | ||
Subtotal | 160,000 | |||
Less: | Exemption Amount | 35,000 | ||
Minimum Taxable income | $125,000 X.075 | |||
computed Minimum Tax | $ 9,375 | |||
Less: | Regular Tax | 8,648 | ||
Minimum Tax Liability | $ 727 |
Since the A's minimum tax liability exceeded their regular tax by $727, they had a minimum tax liability of $727 in 1987.
Example 2. Ms. B was a single taxpayer in 1987. She had a regular income tax liability of $9,375 on taxable income of $100,000. She had an adjustment of $50,000 from a passive activity loss. Ms. B's minimum tax liability is shown below:
Iowa Taxable income | $100,000 | |||
Plus: | Tax Preference Items and Adjustments | 50,000 | ||
Subtotal | $150,000 | |||
Less: | Exemption Amount | 35,000 | ||
Subtotal | $115,000 | |||
Plus: | Reduction in Exemption Amount (25% of $37,500) | 9,375 | ||
Minimum Taxable income | $124,375 X.075 | |||
computed Minimum Tax | $ 9,328 | |||
Less: | Regular Tax | 8,648 | ||
Minimum Tax Liability | $ 680 |
Ms. B had a minimum tax liability of $680 in 1987 because the minimum tax exceeded the regular tax for 1987 by $680.
Total Net income Plus All Tax Preferences, Adjustments and Losses
For purposes of this computation, only those adjustments, tax preferences, and losses shown on Form lA 6251 are applicable for determining which items shall be included in the numerator and the denominator
This rule is intended to implement Iowa Code section 422.5 as amended by 2003 Iowa Acts, Senate File 442.
Iowa Admin. Code r. 701-39.6