Providing for an individual income tax credit for the purchase of firearm safety devices and including retroactive and other applicability provisions

Description

House File 1034 creates an individual income tax credit not to exceed $500 for the purchase of a firearm safety device, defined as a device to prevent a firearm from being operated without first deactivating the device or a qualified gun safe. The tax credit is not refundable but may be credited to the tax liability for the following year.

The Bill is retroactively effective to January 1, 2025, for tax years beginning on or after that date and applies to firearm safety devices purchased on or after the effective date of the Bill.

Background

The sales price of a firearm safety device as defined in the Bill is the same as in Iowa Code section 423.1(51).

Assumptions

• According to the Iowa Department of Revenue (IDR), approximately 568,000, or 43.6%, of Iowa households in 2024 owned a firearm.
• The average increase in gun owners each year is 1.0%.
• Approximately 44.0% of guns are handguns, according to Pew Research Center, with 56.0% being long guns, including rifles and shotguns.
• Approximately 30.0% of handgun owners and 7.0% of long gun owners leave their guns unsecured.
• Approximately 6,100, or 6.3%, of households with unsecured guns purchased gun safes in calendar year (CY) 2024.
• Multiple gun safes will not be purchased by Iowa households in future years.
• Inflation is measured at 2.3% annually for tax year (TY) 2025 through TY 2030.
• In 2024, the average cost of a handgun safe was $110, while the average cost of a long gun safe was $324, according to the IDR. Safe sales are assumed to mirror current ratios of handguns to long guns.
• According to the IDR, it is assumed that 87.3% of the tax credits will be claimed, with the timing of claims indicated below:
• Year 0 — 0.0%
• Year 1 — 60.4%
• Year 2 — 22.9%
• Year 3 — 4.1%
• The initial fiscal impact for claims under the Bill will occur in FY 2026 for TY 2025.
• The income surtax for schools is a local option tax that is based on a taxpayer’s Iowa income tax liability. Law changes that lower Iowa income tax liability also lower the amount of income surtax owed by any taxpayer subject to the surtax. For this projection, the surtax is assumed to equal 2.5% of State individual income tax liability.

Fiscal Impact

The proposed individual income tax credit in HF 1034 is projected to decrease net individual income tax liability and State General Fund revenue by the following amounts:

• FY 2026 = $0.9 million
• FY 2027 = $1.2 million
• FY 2028 = $1.3 million
• FY 2029 = $1.4 million
• FY 2030 = $1.4 million
• FY 2031 = $1.5 million

The decrease in tax liability is also projected to decrease the statewide local option income surtax for schools by the following amounts:

• FY 2026 = $22,000
• FY 2027 = $31,000
• FY 2028 = $33,000
• FY 2029 = $35,000
• FY 2030 = $36,000
• FY 2031 = $37,000

Sources

• Moody’s Analytics
• Pew Research Center
• Iowa Department of Revenue
• Legislative Services Agency analysis