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Bill > SF201
IA SF201
A bill for an act relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions.
summary
Introduced
02/04/2025
02/04/2025
In Committee
02/04/2025
02/04/2025
Crossed Over
Passed
Dead
Introduced Session
91st General Assembly
Bill Summary
Under current law, a taxpayer may exclude retirement income from the computation of net income for purposes of the individual income tax. In order to be eligible for the retirement income exclusion, a person must be disabled, at least 55 years of age, or be the surviving spouse of an individual or be a survivor having an insurable interest in an individual who would have qualified for the retirement income exclusion. This bill excludes up to $500,000 of nonqualified deferred compensation plan income from the computation of net income for purposes of the individual income tax under similar circumstances as the retirement income exclusion. In order to be eligible for the nonqualified deferred compensation plan income exclusion, the taxpayer must be disabled, at least 55 years of age, or be the surviving spouse of an individual or be a survivor having an insurable interest in an individual who would have qualified for the income exclusion. A nonqualified deferred compensation plan is deferred compensation with no federal legal deferral limit that is subject to tax at a later date, and is usually made available to select employees. The bill applies retroactively to January 1, 2025, for tax years beginning on or after that date.
AI Summary
This bill modifies Iowa's individual income tax code by creating a new tax exemption for nonqualified deferred compensation plans (NDCPs), which are specialized compensation arrangements typically offered to select employees that allow them to defer income to a later tax year without federal legal deferral limits. Under the proposed legislation, individuals who are disabled, at least 55 years old, or the surviving spouse of someone who would have qualified for the exemption can subtract up to $500,000 of NDCP income or earnings from their taxable income. For married couples filing separate tax returns, the $500,000 exclusion will be proportionally allocated between spouses based on their individual NDCP income. The bill is designed to provide tax relief for certain individuals receiving deferred compensation and will apply retroactively to tax years beginning on or after January 1, 2025, meaning eligible taxpayers can benefit from this exemption for those future tax years. This provision aims to offer additional financial flexibility for older workers, disabled individuals, and surviving spouses who receive income from these specialized compensation plans.
Committee Categories
Budget and Finance
Sponsors (2)
Last Action
Subcommittee: Schultz, Bisignano, and Dawson. S.J. 243. (on 02/11/2025)
Official Document
bill text
bill summary
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bill summary
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bill summary
| Document Type | Source Location |
|---|---|
| State Bill Page | https://www.legis.iowa.gov/legislation/BillBook?ga=91&ba=SF201 |
| BillText | https://www.legis.iowa.gov/docs/publications/LGI/91/attachments/SF201.html |
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