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State Tax Law Changes Could Benefit You!
by: Iowa Legal Aid

Iowa's Earned Income Tax Credit is refundable!

For several years, Iowa taxpayers could get a state tax credit equal to 6.5% of the Federal Earned Income Tax Credit (EIC). The state credit was not refundable. This meant the credit could reduce the taxes you owed to the state of Iowa, but the state kept any leftover credit.

The Iowa Earned Income Tax Credit in 2008 will be 7% of the federal EIC. The credit will also be refundable. Let's look at an example of how this can work.

Example: You qualify for $2,000 in the federal EIC. When you file your state of Iowa Tax return, you will enter a $140 credit on your state return. This is 7% of the $2,000 federal EIC. Your total tax from the tax tables is $62 based upon your taxable income. You have two personal credits for yourself - as you are filing head of household, and one personal credit for your child. Altogether, you have $100 in personal credits. These credits reduce the amount of tax you owe to less than zero.($62 - $100 = -$38, so you owe no tax.) Because the personal credits cancel out any taxes you owe, you will receive the entire state Earned Income Tax Credit of $140 in your refund.

How Much Could Taxpayers Who Applied Get from the Federa; Earned Income Credit in Tax Year 2008?

Families with one child who earn less than $33,995 (or less than $36,995 for married filing jointly status workers) are eligible for a credit of up to $2,917.
Families with two or more children who earn less than $38,646 in 2008 (or less than $41,646 for married filing jointly status) are eligible for a credit of up to $4,824.
Workers without a qualifying child who earn less than $12,880 in 2008 (or less than $15,880 for married workers) are eligible for a credit of up to $438.

Last Reviewed On: 07/06/09

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