Iowa Admin. Code r. 701-304.15
There is a child and dependent care credit which is refundable to the extent the amount of the credit exceeds the taxpayer's income tax liability less other applicable income tax credits. If a taxpayer claims the child and dependent care credit, the taxpayer cannot claim the early childhood development credit described in rule 701-304.31 (422).
* Net income | Percentage of federal credit allowed for tax years beginning on or after January 1, 2006, and before January 1, 2021 | Percentage of federal credit allowed for tax years beginning on or after January 1, 2021 |
Less than $10,000 | 75% | 75% |
$10,000 or more but less than $20,000 | 65% | 65% |
$20,000 or more but less than $25,000 | 55% | 55% |
$25,000 or more but less than $35,000 | 50% | 50% |
$35,000 or more but less than $40,000 | 40% | 40% |
$40,000 or more but less than $45,000 | 30% | 30% |
$45,000 or more but less than $90,000 | No Credit | 30% |
$90,000 or more | No Credit | No Credit |
*Note that in the case of married taxpayers who have filed joint federal returns and elect to file separate returns or to file separately on the combined return form for Iowa purposes, the taxpayers must determine the child and dependent care credit by the schedule provided in this rule on the basis of their combined net incomes. The credit determined from the schedule must be allocated between the married taxpayers in the proportion that each spouse's net income relates to the combined net income of the taxpayers.
EXAMPLE A: A married couple has a combined net income of $40,000. Both spouses were employed. They had a federal child and dependent care credit of $600 which related to expenses incurred for care of their two small children. One of the spouses had a net income of $30,000 and the second spouse had a net income of $10,000.
The taxpayers' Iowa child and dependent care credit was $180 since they were entitled to an Iowa child and dependent care credit of 30 percent of their federal credit of $600. If the taxpayers elect to file separate Iowa returns, the $180 credit would be allocated between the spouses on the basis of each spouse's net income as it relates to the combined net income of both spouses as shown below:
EXAMPLE B: A married couple filed their Iowa return separately on a combined return. Both spouses were employed. They had a federal child and dependent care credit of $800 which related to expenses incurred for care of their children. One spouse had a net income of $25,000 and the other spouse had a net income of $12,500, so their combined net income was $37,500.
The taxpayers' Iowa child and dependent care credit was $320, since they were entitled to an Iowa credit of 40 percent of their federal credit of $800. The $320 credit is allocated between the spouses on the basis of each spouse's Iowa net income as it relates to the combined Iowa net income of both spouses as shown below:
In cases where married taxpayers are nonresidents or part-year residents of Iowa and are filing separate Iowa returns or are filing separately on the combined Iowa return form, the child and dependent care credit allowable on the
Iowa return should be allocated between the spouses in the ratio of the Iowa net income of each spouse to the combined Iowa net income of the taxpayers.
A married couple lives in Omaha, Nebraska. One of the spouses worked in Iowa and had an Iowa-source net income of $15,000. That spouse had an all-source net income of $20,000. The second spouse had an Iowa-source net income of $10,000 and an all-source net income of $15,000. The couple had a combined Iowa-source net income of $25,000 and a combined all-source net income of $35,000. The taxpayers had a federal child and dependent care credit of $800 which related to expenses incurred for the care of their two young children. The taxpayers' Iowa child and dependent care credit is calculated below:
This rule is intended to implement Iowa Code section 422.12C.
Iowa Admin. Code r. 701-304.15
ARC 8702B, IAB 4/21/10, effective 5/26/10; ARC 0337C, IAB 9/19/12, effective 10/24/12; ARC 1665C, IAB 10/15/14, effective 11/19/14; ARC 6149C, IAB 1/12/22, effective 2/16/22; Editorial change: IAC Supplement 11/2/22; Editorial change: IAC Supplement 10/18/23