The owner’s allowable Iowa section 179 deduction is based on the aggregate of all of the owner’s own available section 179 deductions and all section 179 deductions passed through to the owner from all sources. The Iowa section 179 dollar limit applies to a passthrough entity as well as to each owner. This section contains general information applicable to all passthrough entity owners (partners, LLC members, and S-Corp Shareholders, whether such owner is an individual or separate business entity). A spouse may not deduct more in section 179 expensing than is actually attributable to that spouse. This apportionment only applies to the couple’s deduction limitation, not to the business income limitation or to the allocation of their actual section 179 deduction amount. However, the couple may elect to apportion their deduction limitation by some other ratio for Iowa purposes if they so choose. Spouses filing separate Iowa returns are treated as one taxpayer for purposes of calculating the Iowa 179 deduction limitations, and are assumed to have split the total allowable deduction limitation evenly between them. This rule also applies to spouses filing separate returns for Iowa purposes, whether on a combined return (status 3) or separate returns (status 4). The default is to allocate 50% of the deduction limitation to each spouse, but the couple may elect a different ratio if they so choose. Special Note for Married Filing Separate Filers: Federal law provides that taxpayers who file married filing separately must calculate the section 179 deduction limitations as if they were one taxpayer, meaning that they must combine the values of section 179 property placed in service by (or passed through to) both spouses in determining the dollar limitation and the reduction limitation, if any, and then apportion the allowable deduction limitation between them. Taxpayers are required to adjust their deduction for Iowa purposes using the IA 4562 A/B Iowa Depreciation Adjustment Schedule. This means that for some tax years, adjustments are required to determine the correct Iowa section 179 expensing deduction. However, for certain years, the Iowa limitations on this deduction are different from the federal limitations for the same year. Iowa taxpayers who elect the federal section 179 deduction must also take a section 179 deduction for the same assets for Iowa income tax purposes in that year. The amount of the Iowa section 179 deduction is the same as the amount of the federal section 179 deduction, up to the Iowa limit. Once the taxpayer makes this federal election, the same election automatically applies to the same property for Iowa purposes as well, except under specific circumstances. The election to expense qualifying property under section 179 of the IRC is made at the federal level. More information on the federal treatment of section 179 deductions may be found on the Internal Revenue Service’s website and in IRS Publication 946, Chapter 2.
This allows businesses to deduct the cost of qualifying tangible personal property purchased for business use in one year, rather than deducting the cost of the tangible personal property over a number of years using depreciation. Under section 179 of the Internal Revenue Code, taxpayers can deduct from their federal income tax the cost of qualifying property used in a trade or business in the year the property was placed in service. This guidance was updated on March 15, 2019, to reflect these changes. This Special Election has now been extended to all taxpayers. The earlier legislation also provided the Special Election described below to individuals and partnerships, but not to Corporations (including entities taxed as S-Corporations) and financial institutions. Under that prior law Corporations subject to the income tax, entities that file as S-Corporations for income tax purposes, and financial institutions subject to the franchise tax were subject to a lower ($25,000) section 179 deduction limit for 2018. Earlier legislation only applied this limit to individuals and entities taxed as partnerships. NOTICE: On March 15, 2019, Governor Reynolds signed Senate File 220, which made the same ($70,000) section 179 deduction limitation applicable to all taxpayers for 2018.
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