A bill for an act excluding interest income earned from banks and credit unions from the calculations of Iowa net income for purposes of the individual income tax, and including effective date and retroactive applicability provisions.

2025-2026 Regular Session Introduced by Dave Jacoby

Bill HF 568 allows Iowa taxpayers to exclude interest income from banks and credit unions from taxable income, providing potential tax relief starting in 2025.

Introduced, referred to Ways and Means.

#banks #creditunions #incometaxes #taxation

Summary of Bill HF 568

Bill Number: HF 568
Title: A bill for an act excluding interest income earned from banks and credit unions from the calculations of Iowa net income for purposes of the individual income tax, and including effective date and retroactive applicability provisions.
Status: Introduced, referred to Ways and Means
Introduced Date: February 24, 2025
Classification: Bill
Subject: Banks, Credit Unions, Income Taxes, Taxation

Purpose and Intent

The primary purpose of Bill HF 568 is to amend Iowa's individual income tax calculations by excluding interest income earned from banks and credit unions. This legislative change aims to provide tax relief to individuals by reducing their taxable income, thereby potentially lowering their overall tax liability.

Key Provisions

Exclusion of Interest Income:

The bill introduces a new subsection (45) to Section 422.7 of the Iowa Code, which allows taxpayers to subtract interest income received from banks and credit unions from their Iowa net income calculations.

Definitions:

Bank: Defined as a corporation or limited liability company engaged in banking, including savings and loans, savings associations, or savings banks organized under state or federal laws.
Credit Union: Defined as a cooperative, nonprofit association incorporated under Iowa law or the federal Credit Union Act, which is insured by the National Credit Union Administration.

Impact

Who is Affected:

The bill primarily affects individual taxpayers in Iowa who earn interest income from banks and credit unions. By excluding this income from taxable calculations, it aims to benefit a broad range of taxpayers, particularly those with savings accounts or other interest-bearing accounts.

Financial Implications:

The exclusion of interest income could lead to a decrease in state revenue from individual income taxes, although the exact financial impact would depend on the volume of interest income earned by taxpayers.

Procedural Aspects

Effective Date:

The bill is deemed of immediate importance and will take effect upon enactment.

Retroactive Applicability:

The provisions of this bill will apply retroactively to tax years beginning on or after January 1, 2025. This means that taxpayers will be able to benefit from this exclusion for the entire tax year of 2025 and beyond.

Conclusion

Bill HF 568 represents a significant change in Iowa's taxation of individual income by excluding interest income from banks and credit unions. This legislative measure is designed to provide tax relief to individuals and encourage savings, with immediate and retroactive effects starting from the beginning of 2025. The bill is currently under consideration by the Ways and Means Committee.