For tax years beginning on or after January 1, 2011, all pay
received from the federal government for military service performed while on
active duty status in the armed forces, armed forces military reserve, or the
national guard is excluded to the extent the pay was included in federal
adjusted gross income.
(1) Definition
of active duty personnel. Active duty personnel who qualify for the exclusion
include the following:
a. Active duty members
of the regular armed forces, which include the Army, Navy, Marines, Air Force
and Coast Guard of the United States.
b. Members of a reserve component of the
Army, Navy, Marines, Air Force and Coast Guard who are on an active duty status
as defined in Title 10 of the United States Code.
c. Members of the national guard who are in
an active duty status as defined in Title 10 of the United States
Code.
(2) Military
personnel who do not qualify for the exclusion include the following:
a. Members of a reserve component of the
Army, Navy, Marines, Air Force and Coast Guard who are not in an active duty
status as defined in Title 10 of the United States Code.
b. Full-time members of the national guard
who perform duties in accordance with Title 32 of the United States
Code.
c. Other members of the
national guard who are not in an active duty status as defined in Title 10 of
the United States Code.
d. Other
members of the national guard who do not receive pay from the federal
government.
(3) Income
from nonmilitary activities. Any wages earned from nonmilitary wages for
personal services conducted in Iowa by both residents and nonresidents of Iowa
will still be subject to Iowa individual income tax. In addition, both
residents and nonresidents of Iowa who earn income from businesses, trades,
professions or occupations operated in Iowa that are unrelated to military
activity will be subject to Iowa individual income tax on that
income.
(4) Exemption from Iowa
withholding. Active duty personnel meeting the requirements of subrule
302.76(1) who are receiving pay from the federal government on or after January
1, 2011, that is exempt from Iowa individual income tax may complete an IA W-4
Employee Withholding Allowance Certificate and claim exemption from Iowa income
tax for active duty pay received from the federal government.
This rule is intended to implement Iowa Code section
422.7 as amended by 2011 Iowa
Acts, House File 652.
