Owners of Iowa Educational Savings (529) Plans and First-Time Homebuyer Savings Accounts now have until May 30 to take action on their respective accounts for the 2020 tax year.
These changes took effect through the new public health disaster emergency proclamation Gov. Kim Reynolds signed April 30.
Prior to the extension, taxpayers could deduct qualifying contributions they made to their Iowa Educational Savings (529) Plans between Jan. 1 and April 30 on their 2020 Iowa income tax returns up until April 30, the typical annual deadline, rather than having to wait until they file 2021’s returns, the Iowa Department of Revenue announced May 4.
“Contributions to College Savings Iowa or the IAdvisor 529 Plan that were previously deducted for Iowa income tax purposes must be included as Iowa income when distributed, unless they are used to pay for qualified education expenses,” the department said on a webpage regarding the 529 plan.
Taxpayers can withdraw up to $10,000 per dependent to pay for K-12 tuition expenses tax-free at an accredited Iowa school, according to the department.
Taxpayers who opened interest-bearing savings accounts in 2020 who want to participate in the first-time homebuyer savings account program typically have until April 30, 2021, to file an Account Holder and Designated Beneficiary Form 41-162, but they now have until May 30.
The savings accounts allow individuals, including current homeowners, to make tax-deductible contributions into an account that a designated person can use for expenses for purchasing a first home, such as a down payment and closing costs, according to the department’s webpage on first-time homebuyers savings accounts.
The department stipulates if the money is used for a “nonqualified reason, or if the money is not used to purchase a home within 10 years of the time the account was first opened, any money that was previously deducted but was not used for a qualifying purchase, plus 10%, is added to the account holder’s taxable income for income tax purposes.”
Exceptions to the 10% penalty include the death of the account holder.
Iowa individual income tax returns are still due June 1. Iowa Department of Revenue Director Kraig Paulsen announced that deadline in an order March 29.