Endow Iowa Tax Credit: What It Is and How to Claim It

The Endow Iowa Tax Credit is a state-level incentive designed to foster philanthropic giving. It provides a tax benefit to donors who contribute to specific types of charitable funds within their local communities. The program’s primary objective is to build permanent financial assets for Iowa’s community foundations, creating a sustainable source of funding for local nonprofit organizations and charitable causes. By encouraging long-term investment in these endowments, the initiative aims to strengthen the capacity of communities to meet their own needs for generations to come.

This tax credit is not a deduction but a direct reduction of the donor’s state income tax liability. It is administered by the Iowa Economic Development Authority (IEDA) and is available to a wide range of donors.

Qualifying for the Credit

Eligibility for the Endow Iowa Tax Credit depends on both the donor and the nature of the donation itself. A broad array of donors can participate, including individuals, estates, and trusts. Businesses such as C corporations, S corporations, limited liability companies (LLCs), and partnerships that have an Iowa tax liability are also eligible to receive the credit for their contributions.

The donation must be made to a permanent endowment fund held at a qualified community foundation. A permanent endowment means the principal of the gift is invested and preserved, while only the earnings are used for grants, ensuring the fund’s longevity. The community foundation receiving the gift must be certified by the Iowa Economic Development Authority (IEDA). A list of these qualified foundations is maintained by the state, allowing donors to verify an organization’s status.

A variety of assets can be used to make a qualifying gift. While cash is the most common form of donation, the program also accepts contributions of publicly traded stocks, bonds, and mutual funds. Tangible assets like real estate and agricultural commodities such as grain are also permissible gifts. Furthermore, certain retirement assets can be donated.

Calculating the Credit Amount

Donors receive a state tax credit equal to 25% of the total value of their contribution. For instance, a qualifying gift of $10,000 to a permanent endowment fund would generate a $2,500 tax credit. The program limits the maximum credit a donor can receive in a single year to $100,000 for an individual or $200,000 for a couple filing jointly.

The program operates under a statewide cap, meaning there is a limited amount of tax credits available each calendar year. Applications are approved on a first-come, first-served basis, and the process opens in January each year. For 2025, the application portal re-opens at 8 a.m. on January 15th. If the annual cap is reached, the application process will close until a new allocation of credits becomes available in the next calendar year.

The program includes a five-year carryforward provision. If a donor’s tax credit for a given year exceeds their state tax liability, they do not lose the excess amount. Instead, the unused portion of the credit can be carried forward and applied against their Iowa income tax liability for up to the next five years, or until the credit is fully used. This ensures that donors can realize the full value of the credit, even if their tax situation fluctuates.

How to Claim the Endow Iowa Tax Credit

The process for claiming the credit begins after the donor makes a qualifying gift to a permanent endowment fund. The community foundation will provide the donor with the official Endow Iowa Tax Credit application form. The donor is responsible for accurately completing their portion of the form, including contact information and Social Security number, before signing and returning it to the foundation.

After the donor completes the application, the community foundation takes over the administrative process. The foundation will verify the gift, sign off on the application, and submit it directly to the Iowa Economic Development Authority (IEDA) on the donor’s behalf. To be valid, the application must be submitted by the foundation within 12 months of the date of the gift.

Following submission, the IEDA reviews the application for approval. Once approved, the IEDA mails an official tax credit certificate directly to the donor. This certificate is the formal documentation that substantiates the donor’s eligibility for the credit. The timing of receipt can depend on when the application was submitted and the volume of applications being processed by the state agency.

The final action required by the donor occurs during tax filing season. The donor must attach the tax credit certificate they received from the IEDA to their Iowa income tax return, typically Form IA 1040. The credit itself is claimed on the IA 148 Tax Credits Schedule, which is filed along with the main state tax return. This final step formally applies the credit against the donor’s tax liability for the year.