Iowa Disability Income Exclusion 41-127

Disability Income Exclusion 41-127
IA 2440 Disability Income Exclusion, 41-127
2023 IA 2440

Iowa Disability Income Exclusion
tax.iowa.gov
This form should only be completed by retirees under 65 who are disabled and have a federal adjusted
gross income below $20,200 (or below $25,400 if filing married and both spouses are retired, under 65,
and disabled).
Your Information:

Spouse’s Information:

Name:________________________________

Name:_________________________________

Social Security Number:__________________

Social Security Number:___________________

Date of birth (MM/DD/YY): ________________

Date of birth (MM/DD/YY): _________________

Retirement date:________________________

Retirement date:_________________________

Employer (and payer’s name if other than
employer): ____________________________

Employer (and payer’s name if other than
employer): _______________________________
B. Spouse

A. You

1. Total disability income received during the tax year .......................... 1. __________ .00 ________ .00
2. Exclude disability pay. See instructions.
a. Multiply $100 by the number of weeks your disability
payments were $100 or more. Enter total.................................. 2a. _________ .00 ________ .00
b. If you received disability payments of less than $100 for
any week, enter the total you received for all such weeks ......... 2b. _________ .00 ________ .00
c. If you received disability payments for a partial week, enter
the smaller of either the amount you received or the highest
exclusion allowable for the period ..............................................2c. _________ .00 ________ .00
d. Add lines 2a, 2b, and 2c. Enter total .......................................... 2d. _________ .00 ________ .00
3. Add amounts on line 2d column A and column B. Enter total ....................................... 3.________ .00
4. Limit on exclusion. See instructions.
a. Enter your federal adjusted gross income from federal form 1040 ....................... 4a.________ .00
b. Amount used to calculate exclusion decrease...................................................... 4b.

$15,000 .00

c. Subtract line 4b from line 4a. Enter difference. If line 4b is greater than line 4a,
enter zero ............................................................................................................. 4c.________ .00
5. Subtract line 4c from line 3. Enter the difference here and
on IA 1040 Schedule 1, line 19b ................................................................................... 5.________ .00
Physician’s Statement of Permanent and Total Disability
Name of taxpayer with disability: _________________________________________________________
Physician’s name: _____________________________________________________________________
Physician’s address: ___________________________________________________________________
I certify that the taxpayer was permanently and totally disabled on the date they retired, as noted above.
Physician’s signature: _________________________________ Date: ______________________________

41-127a (09/13/2023)

2023 IA 2440 Instructions
Who May Exclude Disability?
If you retired on disability and reported your disability
income in full on your federal income tax return, you
may qualify to exclude a portion of your disability
income from Iowa tax.
You may qualify for the exclusion if you meet all of
these tests:
• You received disability pay and your federal
adjusted gross income (AGI) is below $20,200,
or married taxpayers’ combined AGI is below
$25,400 if both spouses are retired, under 65,
and disabled.
• You were not yet 65 when your tax year ended.
• You retired on disability and were permanently
and totally disabled when you retired.
• On January 1 of this tax year, you had not yet
reached the age when your employer’s retirement
program would have required you to retire.
• You took the exclusion in a prior year and did not
elect to treat your disability income as a pension
for federal purposes.
• If you were married at the end of the tax year, you
must have filed a joint federal income tax return
for the tax year, unless you did not live with
your spouse at any time during the year.
If you meet all of the above tests, you can take the
exclusion until the earliest of the following dates:
1) The first day of the tax year in which you
turn 65, or
2) The first day of the tax year for which you
choose to treat your disability income as a
pension, or
3) The day you reach the age when your
employer’s retirement program would have
required you to retire.
What is Permanent and Total Disability?
A person is permanently and totally disabled when:
• He or she cannot engage in any substantial
gainful activity because of a physical or mental
condition; and
• A qualified physician determined that the
condition (1) has lasted or can be expected to
last continuously for at least a year; or (2) can
be expected to lead to death.
Treating Disability Income as a Pension
Individuals may choose for federal tax purposes to
either treat their disability income as a pension or
to take a disability income credit computed on
federal Schedule R.
If you elect to treat your disability income as a
pension for federal tax purposes, or have elected to
do so in a previous year, you cannot take the Iowa
disability income exclusion.

Line 2: You can exclude either your actual weekly
disability pay or $100 a week, whichever is less.
Use lines 2a and 2b as applicable to figure your
maximum exclusion.
Line 2c: Disability payments are made for part of a
week when one of the following happens after the
first day of the taxpayer’s normal workweek:
1) The disability retirement begins.
2) The disability retirement ends because the
taxpayer reaches the required retirement age.
3) The taxpayer becomes deceased.
If you received disability pay for part of a week,
follow the steps below.
Step 1. Divide $100 by the number of days a
week you normally worked before you retired.
Step 2. Divide the disability pay you received by
the number of days it covered in that week.
Step 3. Compare the Step 1 and Step 2 amounts.
The smaller amount is your daily rate. Your
exclusion for the week is based on it.
Step 4. Multiply your daily rate by the number of
days you received disability pay in the short
week. The result is your exclusion for that week.
Step 5. Add your exclusion for that week to your
exclusion for any other short weeks. Enter the
total on line 2c.
Line 4 : The maximum disability income exclusion
is $5,200. This can increase to a maximum of
$10,400 if married and both spouses receive
disability income and qualify for the exclusion.
The maximum exclusion is reduced, dollar for
dollar, by any amount over $15,000 on line 4a. This
is your federal adjusted gross income.
Line 5: Subtract the amount on line 4c from the
amount on line 3. This is your disability income
exclusion. Enter this amount on IA 1040 Schedule
1, line 19b.
Physician’s Statement
Include with form IA 2440 a physician’s statement of
permanent and total disability. You can use the
physician’s statement on form IA 2440 for this
purpose. If the physician’s statement is on a separate
form, be sure to include the completed statement with
form IA 2440 and file it with your tax return.
If the Veterans Administration (VA) certifies that
you are permanently and totally disabled, you can
include the VA form instead of the physician’s
statement. The VA form must be signed by a physician
of the VA disability rating board. If both taxpayer and
spouse take the exclusion, each must file a
statement.

41-127b (09/13/2023)