Will the federal COVID-19 economic impact payments be taxable in Iowa?
No. The COVID-19 economic impact payments authorized in section 2201 of the federal CARES Act, whether in the form of a rebate or a refundable tax credit, will not be included in Iowa taxable income or added back as part of an individual’s reportable federal income tax refund for Iowa individual income tax purposes.
This important guidance from the Iowa Department of Revenue, under their Income Tax FAQs, seems to confirm something ITR has been advocating for – that federal stimulus payments will not be subject to Iowa tax. A number of legislative leaders had been supportive of ensuring the payments would not be taxable, but there was uncertainty...until now.