This bill amends Section 422.7 of the Iowa Code to allow individuals to exclude up to $500,000 of income received from nonqualified deferred compensation plans from their net income for individual income tax purposes. The eligibility criteria for this exclusion mirror those of the existing retirement income exclusion, requiring the taxpayer to be either disabled, at least 55 years old, or a surviving spouse of an individual who would have qualified for the exemption. Additionally, married taxpayers filing separately will allocate their combined exclusion amount based on the proportion of each spouse's income from the nonqualified deferred compensation plan.

The bill also includes a retroactive applicability provision, stating that the new exclusion will apply to tax years beginning on or after January 1, 2025. This change aims to provide tax relief to certain individuals receiving nonqualified deferred compensation, which is typically available to select employees and has no federal legal deferral limit.

Statutes affected:
Introduced: 422.7