41-127: IA 2440 Iowa Disability Income Exclusion 41-127 (2024)
Iowa · Iowa DOR · Used for tax years 2024
The 2024 IA 2440 calculates the disability income exclusion from Iowa tax. It reports disability income and federal adjusted gross income to determine the exclusion entered on IA 1040 Schedule 1, line 19b.
Who files this form
Use the 2024 IA 2440 to claim an Iowa disability income exclusion if you retired on disability, reported your disability income in full on your federal return, and meet all of these tests:
- You received disability pay and your federal adjusted gross income (AGI) is below $20,200. The limit is below $25,400 for married taxpayers if both spouses are retired, under 65, and disabled.
- You were under 65 at the end of the tax year.
- You were permanently and totally disabled when you retired on disability.
- On January 1 of the tax year, you had not reached your employer’s required retirement age.
- You took the exclusion in a prior year and did not elect to treat your disability income as a pension for federal tax purposes.
- If you were married at year-end, you filed a joint federal return, unless you did not live with your spouse at any time during the year.
What you'll need
To complete IA 2440, have the following information available:
- Your name, Social Security number, birth date, retirement date, and employer’s name. Include the payer’s name if different from the employer. The form also has fields for your spouse’s information.
- Total disability income received during the tax year, weekly payment amounts, and details of any partial-week payments.
- Your federal Form 1040 AGI.
You must include a physician’s statement of permanent and total disability. You may use the statement on IA 2440 or attach a separate completed statement.
If the Veterans Administration (VA) certifies your permanent and total disability, you may instead include a VA form signed by a physician of the VA disability rating board. If both spouses claim the exclusion, each must file a statement.
How to file
File IA 2440 and the required disability statement with your tax return.
Enter the disability income exclusion from IA 2440, line 5, on IA 1040 Schedule 1, line 19b, using code “h.”
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Claiming the exclusion after choosing pension treatment. You cannot take the Iowa exclusion if you elected to treat your disability income as a pension for federal tax purposes, either this year or in a previous year.
- Leaving out the disability statement. A required physician’s statement, or qualifying VA form, must be included with IA 2440. Attach a separate statement if you do not use the one on the form.
- Submitting only one statement when both spouses claim the exclusion. Each spouse must file a statement.
- Leaving out the reporting code. The instructions direct you to report the exclusion on IA 1040 Schedule 1, line 19b, using code “h.”
Questions people ask
What does permanently and totally disabled mean?
You cannot engage in any substantial gainful activity because of a physical or mental condition. A qualified physician must determine that the condition has lasted, or is expected to last, continuously for at least a year, or is expected to lead to death.
How much disability income can I exclude?
The weekly exclusion is your actual disability pay or $100, whichever is less. The maximum exclusion is $5,200, or $10,400 if married and both spouses receive disability income and qualify. The maximum is reduced dollar for dollar by federal AGI over $15,000.
How do I calculate the exclusion for a partial week?
Divide $100 by the number of days you normally worked per week before retirement. Then divide the disability pay for the short week by the number of days it covered. Use the smaller amount as your daily rate and multiply it by the number of days you received disability pay that week. Add the exclusions for all short weeks and enter the total on line 2c.
When does eligibility for the exclusion end?
It ends at the earliest of these points: the first day of the tax year in which you turn 65, the first day of the tax year for which you choose to treat your disability income as a pension, or the day you reach your employer’s required retirement age.