IA 2440 — Iowa Disability Income Exclusion (with instructions)

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202 5 IA 2440

# Iowa Disability Income Exclusion

This form should only be completed by retirees under 65 who are disabled and have a federal adjusted gross income below $20,200 (or below $25,400 if filing married and both spouses are retired, under 65, and disabled). Your Information: Name: ________________________________ Social Security Number: __________________ Date of birth (MM/DD/YY): ________________ Retirement date: ________________________ Employer (and payer's name if other than employer): ____________________________ Spouse's Information: Name: _________________________________ Social Security Number:___________________ Date of birth (MM/DD/YY): _________________ Retirement date: _________________________ Employer (and payer's name if other than employer): _______________________________ B. S pouse A. You 1. Total disability income received during the tax year .......................... 1. __________ .00 ________ .00 2. Exclude disability pay. See instructions. a. Multiply $100 by the number of weeks your disability payments were $100 or more. Enter total .................................. 2a. _________ .00 ________ .00 b. If you received disability payments of less than $100 for any week, enter the total you received for all such weeks ......... 2b. _________ .00 ________ .00 c. If you received disability payments for a partial week, enter the smaller of either the amount you received or the highest exclusion allowable for the period .............................................. 2c. _________ .00 ________ .00 d. Add lines 2a, 2b, and 2c. Enter total .......................................... 2d. _________ .00 ________ .00 3. Add amounts on line 2d column A and column B. Enter total ....................................... 3. ________ .00 4. Limit on exclusion. See instructions. a. Enter your federal adjusted gross income from federal form 1040 ....................... 4a. ________ .00 b. Amount used to calculate exclusion decrease ...................................................... 4b. $15,000 .00 c. Subtract line 4b from line 4a. Enter the difference. If line 4b is greater than line 4a, enter zero ............................................................................................................. 4c. ________ .00 5. Subtract line 4c from line 3. Enter the difference here and on IA 1040 Schedule 1, line 19b ................................................................................... 5. ________ .00 Physician's Statement of Permanent and Total Disability Name of taxpayer with disability: _________________________________________________________ Physician's name: _____________________________________________________________________ Physician's address: ___________________________________________________________________ I certify that the taxpayer was permanently and totally disabled on the date they retired, as noted above. Physician's signature: _________________________________ Date: ______________________________

2025 IA 2440 Instructions Who May Exclude Disability? If you retired on disability and reported your disability income in full on your federal income tax return, you may qualif y to exclude a portion of your disabilit y income from Iowa tax. You may qualify for the exclusion if you meet all of these tests: • You received disability pay and your federal adjusted gross income (AGI) is below $20,200, or married taxpayer s' combined AGI is below $25,400 if both spouses are retired, under 65, and disabled. • You were not yet 65 when your tax year ended. • You retired on disability and were permanently and totally disabled when you retired. • On Januar y 1 of this tax year, you had not yet reached the age when your employer's retirement program would have required you to retire. • You took the exclusion in a prior year and did not elect to treat your disabilit y income as a pension for federal purposes. • If you were married at the end of the tax year, you must hav e filed a joint federal income tax return for the tax year, unless you did not live with your spouse at any tim e during the year. If you meet all of the above tests, you can take the exclusion until the earlies t of the followin g dates: 1. The first day of the tax year in which you turn 65, or 2. The first day of the tax year for which you choose to treat your disabilit y income as a pension, or 3. The day you reach the age when your employer's retiremen t progra m would have required you to retire. What is Permanent and Total Disability ? A person is permanentl y and totall y disabled when: • They cannot engage in any substantial gainful activity becaus e of a physical or mental condition; and • A qualified physicia n determined that the condition (1) has lasted or can be expected to last continuousl y for at least a year; or (2) can be expected to lead to death. Treating Disability Income as a Pension For federal tax purposes, i ndividuals may choose to either treat their disabilit y income as a pension or to take a disability incom e credit computed on federal Schedul e R. If you elec t to trea t your disabilit y incom e as a pension for federal tax purposes , or have elected to do so in a previous year, you cannot take the Iowa disabilit y income exclusion. Line 2: You can exclude either your actual weekly disability pay or $100 a week, whichever is less. Use lines 2a and 2b a s applicabl e to figure your maximu m exclusion. Line 2c: Disabilit y payments are made for part of a week when one of the following happens after the first day of the taxpayer 's normal workweek: 1) The disabilit y retiremen t begins. 2) The disabilit y retirement ends becaus e the taxpayer reaches the required retirement age. 3) The taxpayer becomes deceased. If you received disabilit y pay for part of a week, follow the steps below. Step 1. Divide $100 by the number of days a week you normall y worked before you retired. Step 2. Divide the disabilit y pay you received by the number of days it covered in that week. Step 3. Compare the Step 1 and Step 2 amounts. The smaller amount is your daily rate. Your exclusion for the week is based on it. Step 4. Multiply your daily rate by the number of days you received disability pay in the short week. The result is your exclusion for that week. Step 5. Add your exclusion for that week to your exclusion for any other short weeks. Enter the total on line 2c. Line 4: The maximum disability income exclusion is $5,200. This can increase to a maximum of $10,400 if married and both spouses receive disability income and qualify for the exclusion. The maximu m exclusio n is reduced, dollar for dollar, by any amount over $15,000 on line 4a. This is your federal adjusted gross income. Line 5: Subtrac t the amount on line 4c from the amount on lin e 3. This is your disabilit y income exclusion. Enter this amount on IA 1040 Schedule 1, line 19b, using code "h". Physician's Statement A physician's statement of permanent and total disability must be included with IA 2440. You can use the physician's statement on IA 2440 for this purpose. If the physician's statement is on a separate form, be sure to include the completed statement with IA 2440 and file it with your tax return. If the Veterans Administration (VA) certifies that you are permanently and totally disabled, you can include the VA form instead of the physician's statement. The VA form must be signed by a physician of the VA disability rating board. If both taxpayer and spouse take the exclusion, each must file a statement.