Fillable Form Ia 2440 - Disability Income Exclusion

IA 2440 General Instructions

If you retired on disability and reported your disability

Line 2: You can exclude either your actual weekly

income in full on your federal income tax return, you

disability pay or $100 a week, whichever is less. Use

may qualify to exclude a portion of your disability

lines 2a, 2b, and 2c as applicable to figure your

income from Iowa tax. To qualify for the exclusion

maximum exclusion.

you must meet all of the tests below.

Line 2c: If you received disability pay for part of a

week, follow the steps below.

Who Can Exclude Disability?

Step 1. Divide $100 by the number of days a

You can take the exclusion if you meet all these

week you normally worked before you retired.

tests:

Step 2. Divide the disability pay you received by

•

You received disability pay.

the number of days it covered in that week.

•

You were not yet 65 when your tax year

Step 3. Compare the Step 1 and Step 2 amounts.

ended.

The smaller amount is your daily rate. Your

•

You retired on disability and were permanently

exclusion for the week is based on it.

and totally disabled when you retired.

Step 4. Multiply your daily rate by the number of

•

On January 1 of this tax year, you had not yet

days you received disability pay in the short

reached

the

age

when

your

employer’s

week. The result is your exclusion for that

retirement program would have required you to

week.

retire.

Step 5. Add your exclusion for that week to your

•

You took the exclusion in a prior year and did

exclusion for any other short weeks. Enter the

not elect to treat your disability income as a

total on line 2c.

pension for federal purposes.

•

If you were married at the end of the tax year,

Disability payments are made for part of a week

you must have filed a joint federal income tax

when one of the following happens after the first day

return for the tax year, unless you did not live

of the taxpayer’s normal workweek:

with your spouse at any time during the year.

The disability retirement begins.

The disability retirement ends because the

If you meet these tests, you can take the exclusion

taxpayer reaches required retirement age.

until the earliest of the following dates:

The taxpayer dies.

The first day of the tax year in which you

turn 65.

Line

4: Generally, the maximum disability

The first day of the tax year for which you

income exclusion is $5,200. This can increase to

choose to treat your disability income as a

a maximum of $10,400 if married and both

pension.

spouses receive disability income and qualify for

The day you reach the age when your

the exclusion.

employer’ s retirement program would have

The maximum exclusion is reduced, dollar for dollar,

required you to retire.

by any amount over $15,000 on line 4a. That line

shows your federal adjusted gross income.

What is Permanent and Total Disability?

A person is permanently and totally disabled when:

Line 5: Subtract the amount on line 4c from the

•

He or she cannot engage in any substantial

amount on line 3. This is your disability income

gainful activity because of a physical or mental

exclusion. Enter this amount on line 24 of your IA

condition; and

1040.

•

A physician determined that the condition (1)

Physician’s Statement

has lasted or

can

expected

last

Enclose with form IA 2440 a physician’s statement of

continuously for at least a year; or (2) can be

permanent and total disability. You can use the

expected to lead to death.

physician’s statement on form IA 2440 for this

Treating Disability Income as a Pension

purpose. If the physician’s statement is on a separate

Individuals may choose for federal tax purposes to

form, be sure to include the completed statement with

either treat their disability income as a pension or to

form IA 2440 and file it with your tax return.

take a disability income credit computed on federal

If the Veterans Administration (VA) certifies that you

Schedule R.

are permanently and totally disabled, you can include

If you elect to treat your disability income as a

the VA form instead of the physician’s statement. The

pension for federal tax purposes, or have elected to

VA form must be signed by a physician of the VA

do so in a previous year, you cannot take the Iowa

disability rating board.

disability income exclusion.

If both taxpayer and spouse take the exclusion, each

Line 1: Enter your total disability income received

must file a statement.

in the tax year. If married and filing separately on the

combined return form for Iowa tax purposes, and

both spouses receive disability income, report these

amounts separately using both columns 1 and 2.

41-127b (7/3/14)

Form Ia 2440 - Disability Income Exclusion - 2014 Page 2

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