As tax law is very complicated, this article is intended only for educational or illustrative purposes and should not be construed to communicate legal or professional advise. You should contact us with any specific questions so we can properly interpret how the tax laws applies to your situation. Killingbeck Tax Preparation, Kokomo, Indiana. 765-452-8000.
How to Save with 39 Indiana Income Tax Credits!
We have put together for you the below listing of the basic rules for tax deductible savings from some 39 State Income Tax Credits. (For additional tax savings laws, please see our listing of Federal Tax Deductions and State Tax Deductions and Federal Income Tax Credits under our Tax Preparation listing.)
The tax deductible savings you receive by claiming a State Income Tax Credit does not depends on your top tax bracket as deductions do. Rather, credits are based on a percentage determined by the rules of each credit. Depending on the particular credit, you may save 10% all the way to 100% of your qualifying amount!
There are two types of income tax credits. 1) Nonrefundable Credits help you save when you have tax that you can reduce. 2) Refundable Credits give you money back even when you don't have any tax to reduce. In this article we will start by looking at the savings of refundable credits and then look closely at how you can save with nonrefundable credits. Let us know if you have questions. Killingbeck Insurance, Kokomo Indiana, 765-452-8000.
Refundable State Tax Credits
Refundable income tax credits give you money back (or savings against tax) even when you don't have any tax to reduce.
Indiana State and County Tax Withheld: Lines 1 & 2
- Watch that you use a W-2 that shows both state and county withholding as some W-2s only show on certain copies.
- Do not take credit on Indiana return for taxes paid to other states. Must file tax return with other state. See further down the page.
Estimated Tax Paid on Current Year: Line 3
Elderly Unified Tax Credit: Line 4
Our tax program automatically figures deduction (other than if in prison). Can also use SC40 if income less than exemptions.
a. Requirements for Unified Tax Credit:
i. Must claim credit by June 30th.
ii. Must by 65 or older at the end of the year.
iii. If married, couple must file joint if they lived together at anytime during the year.
iv. Income on line 1 is less than $10,000.
v. Must have been a resident of Indiana 6 months.
(a) If spouse dies after Jan. 1st of current tax year, surviving spouse can still claim
credit for both of them.
(b) If no surviving spouse, cannot claim the credit.
vi. Must not have been in prison over 180 days.
b. If taxpayer dies before filing tax return, only a spouse can claim a refund. You must attach a death certificate to get credit.
c. Credit varies by income One 65+ Both 65+
Less than $1000 $100 $ 140
$1000 to $2999 $ 50 $ 90
$3000 to $9999 $ 40 $ 80
Indiana Earned Income Tax Credit: Line 5
The Indiana Earned Income Credit is no longer a % of federal. Now has its own rules (using old Federal EIC rules).
a. Income on line 1 of IT-40 must be
i. Under $43,100 if 2 or more children.
ii. Under $37,900 if 1 child.
iii. Under $14,300 if no children.
b. Must have claimed EIC on Federal.
c. State has own EIC tables to determine Credit.
d. Credit should computed automatically on Form IN-EIC.
e. Generally uses 2001 IRS EIC rules.
i. Only individual with highest AGI can claim child.
Part year residents & nonresidents must apportion EIC.
Lake County Residential Income Tax Credit: Line 6
a. Must meet following requirements:
i. You paid property tax to Lake County on your principle residence.
ii. Your earned income is less than $18,600. Must have earned income to qualify for credit.
iii. You are not claiming the homeowners residential property tax deduction.
iv. Maximum credit is $300. Use worksheet.
Economic Development for a Growing Economy
a. Businesses who conduct certain activities to foster job creation or job retention in Indiana
Income Tax Credit (EDGE): Line 7
may qualify for the Edge credit. The approved letter credit must be attached to the return.
Nonrefundable Offset Income Tax Credits
These credits only offset tax and are not refundable.
Credit for Local Income Taxes Paid Outside Indiana.
- Credit applies to taxes paid outside Indiana to a city, county or other local government.
- Taxpayer must not be getting a refund of those taxes or be receiving a credit for Indiana county tax paid.
- Taxpayer must be paying county tax in Indiana.
- The credit is the smaller of:
- The amount of tax paid to the non-Indiana locality.
- The non-Indiana income multiplied by the Indiana County tax rate that the taxpayer pays.
- The amount of Indiana County tax on Indiana return.
- The State of Indiana may ask for a copy of the other State's Return.
County Income Tax Credit for Elder or Disabled
- If taxpayer files a Schedule R on the federal, they are allowed a percentage of the Schedule R credit as a reduction against their county tax. See table in State Tax Booklet for %.
Community Revitalization Enhancement Income
Tax Credit: Code 808
- The credit equals 25% of the qualified investment made under a state approved community revitalization plan.
College Income Tax Credit: Line 4
- Is for property or money donated to an Indiana college.
- Taxpayer can claim a credit of 50% of the donation.
- Maximum credit is $100 Single or $200 Married Filing Joint.
- Use form CC-40.
Credit for Taxes Paid to other States: Line 5
How you take a deduction for taxes paid to other states depends on which state taxes were paid. Must send in Indiana return with copy of the other state’s tax return to State of Indiana.
a. For Kentucky, Michigan, Ohio, Pennsylvania, & Wisconsin
i. If income is from wages, include income on Indiana return.
Often these states hold out Indiana Tax.
ii. If other state held out tax, file a reciprocal return with the
other state to get a refund.
iii. If business or other income, see below.
iv. Winnings from Indiana riverboats are not eligible
for reciprocal agreement.
b. For Arizona, California, Oregon or Washington DC
i. You must include income on Indiana return.
ii. Also file a nonresident return with other state where
they claim a credit for the Indiana tax paid.
iii. Washington DC is different, get Indiana Bulletin 28.
c. For Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
i. These states do not have an income tax.
ii. Just report income on Indiana return.
iii. Credit not allowed.
d. All other states including Illinois
i. In most cases the income is taxed on both state’s tax returns.
ii. Check the other state's rules and file a nonresident return with the other state.
iii. State of Indiana may ask for copy of the other state's return.
iv. Indiana gives a credit for the tax paid to other state.
(a) The credit is the smaller of:
(b) The tax paid to the other state.
(c) Income from other state multiplied by 3.4%
(d) The amount of Indiana tax on Indiana return.
v. Can't file electronically as must send copy of other states tax return to Indiana.
Indiana’s CollegeChoice 529 Education Income Ta
x Credit: Code 837
- There are many 529 plans available but only Indiana’s College Choice plan qualifies for credit.
- Contribution date is date money is put in account and not date check written. State is catching contributions claimed in wrong year.
- Indiana taxpayers making contributions to College Choice are eligible to receive a 20% state tax credit, up to a maximum of $1,000, on their contributions.
- You must repay all or part of credit if money is withdrawn and used for non-college education purposes.
- Must keep money in account at least 12 months.
- Must include 11 digit account number. Must start with 61 or 62 or 10 digit starting with 201 or 208.
- No longer allowed a deduction if rolled from another 529 plan.
Airport Development Zone Credits: Code 800, 801, 802
Blended Biodiesel Credit: Code 803
For producers of these fuels
Capital Investment Income Tax Credit: Code 804
Coal Combustion Product Credit: Code 805 and 806
For manufacturers who use coal products
Community Revitalization Enhancement District: Code 808
Enterprise Zone Income Tax Credit: Code 812, 813, 814
is to encourage businesses to invest & create jobs in distressed urban areas. (5 to 30% credits)
Ethanol Production Credit: Code 815
Headquarter Relocation Income Tax Credit: Code 818
Historic Building Rehabilitation: Code 819
is a 20% credit for state certified rehabilitation expenses of $10,000 or more on a home listed on the Indiana Register of Historic Sites.
Hoosier Business Investment Income Tax Credit: Code 820
Research Expense Credit: Code 822
Very similar to the federal credit but based on research paid in Indiana.
Indiana Development Account Income Tax Credit: Code 823
allowed on contributions to a community development corporation that is designed to assist qualifying low-income residents to accumulate savings and build financial skills. The credit is 50% of contribution.
Industrial Recovery Credit: Code 824
Military Base Investment Cost Income Tax Credit: Codes 826, 827
Neighborhood Assistance Income
is allowed for contributions to upgrade neighborhoods under a state plan.
Tax Credit: Code 828
Prison Investment Income Tax Credit: Code 829
Residential Historic Rehabilitation Income Tax Credit: Code 831
Riverboat Building Credit: Code 832
21st Century Scholars Program: Code 834
is allowed for contributions to this program. The credit is equal to 50% of the contributions made up to $100 Single, $200 Married Filing Joint.
Venture Capital Investment Income Tax Credit: Code 835
Volunteer Remediation Income Tax Credit: Code 836
Alternate Fuel Vehicle Manufacturing Income
Tax Credit : Code 845
School Scholarship Income Tax Credit: Code 849
- A taxpayer that makes a contribution to a scholarship granting organization for use by the scholarship granting organization in a school scholarship program is entitled to a credit.
- The amount of the taxpayer’s credit is equal to fifty percent (50%) of the amount of contribution up to taxpayer’s tax on return.
- Must complete IN-SSC and include certification number on tax return.
- Can carry forward unused credit to next year.
New Employer Income Tax Credit: Code 850
New businesses that employ at least 10 people who are incorporated in Indiana may qualify for this credit.
Give us a call if you have questions or we can be of help, 765-452-8000. Killingbeck Insurance & Tax Preparation, Kokomo, Indiana.