41-127: IA 2440 Iowa Disability Income Exclusion 41-127 (2025)

Who files this form

Use the 2025 IA 2440 to claim the Iowa disability income exclusion if you retired on disability and reported your disability income in full on your federal return. The instructions say you must meet all of these tests:

• You received disability pay and your federal adjusted gross income (AGI) is below $20,200. For married taxpayers, combined AGI must be below $25,400 if both spouses are retired, under 65, and disabled.
• You were under 65 when your tax year ended.
• You were permanently and totally disabled when you retired on disability.
• On January 1 of the 2025 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 the end of the tax year, you filed a joint federal return, unless you did not live with your spouse at any time during the year.

What you'll need

Have the following information and documents ready:

• Your federal Form 1040, which provides the federal AGI used on line 4a.
• Your name, Social Security number, date of birth, retirement date, and employer’s name. Include the payer’s name if different from the employer. The form also has spaces for your spouse’s information.
• Your total disability income and weekly payment details. For partial weeks, you need the number of days normally worked before retirement, the pay received, and the days it covered.
• A physician’s statement of permanent and total disability. You may use the statement on IA 2440 or include a completed separate statement.

A VA certification may replace the physician’s statement if it is signed by a physician of the VA disability rating board. If both spouses claim the exclusion, each must file a statement.

How to file

Complete IA 2440 using your disability income and federal AGI:

1. Enter total disability income on line 1.
2. Use lines 2a through 2c to calculate the exclusion for full and partial weeks. Add those amounts on line 2d, then combine the taxpayer and spouse amounts on line 3.
3. Enter federal AGI on line 4a. Subtract $15,000 to calculate line 4c. Enter zero if $15,000 is greater than your AGI.
4. Subtract line 4c from line 3. Enter the result on line 5 and on IA 1040 Schedule 1, line 19b, using code “h”.
5. Include the required disability statement with IA 2440 and file it with your tax return.

The supplied text does not give a mailing address or e-filing instructions.

Common mistakes

• Claiming the exclusion after choosing pension treatment. You cannot take the Iowa exclusion if you elected to treat disability income as a pension for federal tax purposes, either this year or in a previous year.
• Leaving out the disability statement. A physician’s statement or qualifying VA certification must be included with IA 2440. If both spouses claim the exclusion, each must file a statement.
• Omitting code “h”. The instructions say to enter the exclusion on IA 1040 Schedule 1, line 19b, using code “h”.

Questions people ask

What counts as permanent and total disability?

You must be unable to 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 both spouses receive disability income and qualify. The maximum is reduced dollar for dollar by federal AGI above $15,000.

How do I calculate the exclusion for a partial week?

Divide $100 by the number of days you normally worked each week before retirement. Then divide the disability pay for the partial 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 in that short 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 disability income as a pension, or the day you reach your employer’s required retirement age.

Official sources

• https://revenue.iowa.gov/media/4384/download?inline