A Brief Overview of the Iowa Capital Gain Deduction, July 2015

(2015) A Brief Overview of the Iowa Capital Gain Deduction, July 2015. Revenue, Department of

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Abstract

This paper provides an overview of the capital gain deduction reported by taxpayers in the state of Iowa. The Iowa capital gain deduction allows taxpayers to exclude from income net capital gains realized from the sale of all or substantially all of the tangible personal property or service of a business which has been held for at least ten years meeting the criteria of one of the six categories listed below. A capital gain is defined as a profit that results from a disposition of a capital asset where the amount realized on the disposition exceeds the purchase price. Taxpayers are also required to materially participate in the business or farm to qualify for the deduction. Overall, the intent of the capital gain deduction is to shield small business owners and farmers in Iowa from paying tax to the State on capital gains realized from the sale of their business or land or other related assets.