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) Where as  Refundable credits give you money back when 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) when even when you don't have any tax to reduce.

1. Indiana State and County Tax Withheld:

   1. Watch that you use a W-2 that shows both state and county withholding as some W-2s only show on certain copies. 
   2. 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.
      
      

2. Estimated Tax paid on current year.

3. Elderly Unified Income Tax Credit

   1. Our tax program automatically figures deduction (other than if in prison).  Can also use SC40 if income less than exemptions.
   2. Requirements for Unified Tax Credit
      1. Must claim credit by June 30^th.   
      2. Must be 65 or older at the end of the year.If married, couple
      3. must file joint if they lived  together at anytime during the year.
      4. Income on line 1 is less than $10,000.
      5.  Must have been a resident of Indiana 6 months.
         1. If spouse dies after Jan. 1^st , of current tax  year, surviving spouse can still claim credit for both of them.  \
         2. Other person who dies after Jan. 1^st of current tax year cannot claim the credit. 
      6.  Must not have been in prison over 180 days.
   3. If taxpayer dies before filing tax return, only a spouse can claim a refund.  You must attach a death certificate to get credit.
   4. Credit varies by income       One 65+   Both 65+
       Less than $1000                     $100              $140
      $1000 to $2999                          $50                $90 
      $3000 to $9999                          $40                $8
      
      

4. Indiana Earned Income Tax Credit.

     The Indiana Earned Income Credit is no longer a % of federal. Now has its own rules (using old Federal EIC rules).

5. Lake County Residential Income Tax Credit.

   1. Must meet following requirements
      1. You paid property tax to Lake County on your principle  residence. 
      2. Your earned income is less than $18,600.  Must have earned income to qualify for credit.
      3. You are not claiming the homeowners residential property tax deduction. 
      4. Maximum credit is $300.  Use worksheet.
         
         
6.  Economic Development for a Growing Economy Income Tax Credit (EDGE)
   1. Businesses who conduct certain activities to foster job creation or job retention in Indiana may qualify for the Edge credit.  The approved letter credit must be attached to the return. 
      
       
7. Media Production Expenditure Income Tax Credit.  
   1. Credit for making certain movies in Indiana.
         

Nonrefundable Offset Income Tax Credits

These credits only offset tax and are not refundable.

1. Credit for Local Income Taxes Paid Outside Indiana.

   1. Credit applies to taxes paid outside Indiana to a city, county or other local government. 
   2. Taxpayer must not be getting a refund of those taxes or be receiving a credit for Indiana county tax paid.
   3. Taxpayer must be paying county tax in Indiana.
   4. The credit is the smaller of:
      1. The amount of tax paid to the non-Indiana locality.
      2. The non-Indiana income multiplied by the Indiana County tax rate that the taxpayer pays.
      3. The amount of Indiana County tax on Indiana return.

2. County Income Tax Credit for Elder or Disabled

   1. If taxpayer files a Sch. R on the federal, they are allowed a percentage of the Sch. R credit as a reduction against their county tax.  See table in State Tax Booklet for %.
      
      
3. Community Revitalization Enhancement Income Tax Credit:  Code 808 
   1. The credit equals 25% of the qualified investment made under a state approved community  revitalization plan.
      
      
4. Voluntary Remediation Income Tax Credit:  (Code 836)  
   1. For investments involving redevelopment of a brownfield and environmental remediation.   Expenditures must be certified  by the state.
      
      

5. College Income Tax Credit

   1. Is for property or money donated to an Indiana college.  
   2. Taxpayer can claim a credit of 50% of the donation. 
   3.  Maximum credit is  $100 single or $200 joint.  
   4. Use form CC-40.
      
      

6. Credit for Taxes paid to other States.  

   1. How you take a deduction for taxes paid to other states depends on which state taxes were paid to.    
      *** Must send in Indiana return with copy of the other state’s tax return to State of Indiana.  
      1. For Kentucky, Michigan, Ohio, Penn., & Wisconsin 
         1.  If income is from wages, include income on Indiana return & file a reciprocal return with the other state to get a refund.
         2. If business or other income, see below.
         3. Winnings from Indiana riverboats are not eligible for reciprocal agreement.
      2.  For Arizona, California, Oregon or DC.
         1. You must include income on Indiana return.  Also file a nonresident return with other state where they claim a credit for the Indiana tax paid.  Washington DC is different, get Indiana Bulletin 28.
      3. For Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming: 
         1. These states do not have an income tax.  Just report income on Indiana return.  They are not allowed a credit.
      4. All other states including Illinois:
         1.  In most cases the income is taxed on both state’s tax returns.  Check the other states rules and file a nonresident return with the other state.
         2.  Indiana gives a credit for the tax paid to other state.
            1. The credit is the smaller of:
               1. The tax paid to the other state.
               2. Income from other state multiplied by 3.4%
               3. The amount of Indiana tax on Indiana return.
      5. Can't file electronically as must send copy of other states tax return to Indiana.
         

7. Indiana’s College Choice 529 Education Income Tax Credit

   1. There are many 529 plans available but only Indiana’s College Choice plan  qualifies for credit. 
   2. Contribution date is date money is put in account and not date check written. State is catching contributions claimed in wrong year.
   3. 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. 
   4. You must repay all or part of credit if money is withdrawn and used for non-college education purposes. 
   5. Must keep money in account at least 12 months. 
   6. Must include 11 digit account number.  Must start with 61 or 62 or 10 digit starting with 201 or 208. 
   7. No longer allowed a deduction if rolled from another 529 plan.
      
       
8. Airport Development Zone credits (code 800, 801, 802)
   
   
9. Blended Biodiesel Credit (code 803) for producers of these fuels.
   
   
10. Capital Investment Income Tax Credit (code 804)
    
    
11. Coal Combusion Product Credit. (code 805 and 806)  For manufacturers who use coal products.
    
    
12. Community Reviatlization Enhancement District (code 808)>
    
    
13. 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)   
    
    
14.  Ethanol Production Credit (code 815)
    
    
15. Headquarter Relocation Income Tax Credit(code 818)
    
    
16. 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
    
    
17. Hoosier Business Investment Income Tax Credit(code 820)
    
18. Research Expense Credit. (code 822) 
    Very similar to the federal credit but based on research paid in Indiana. 
19. 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.
    
    
20. Industrial Recovery Credit (code 824)
    
    
21. Military Base Investment Cost(codes 826 & 827)
    
    
22. Neighborhood Assistance Income Tax Credit (code 828)
    is allowed for contributions to upgrade neighborhoods under a state plan.
    
    
23. Prison Investment Income Tax Credit (code 829)
    
    
24. Rerefined Lubricated Oil Facility Credit (830)
    
    
25. Residential Historic Rehabilitation (831)
    
    
26. Riverboat Building Credit (code 832)
    
    
27. 21^st 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 joint.
    
    
28. Venture Capital Investment Income Tax Credit.(835)
    
    
29. Volunteer remediation Income Tax credit (836) 
    
    
30.  Employer Health Benefit Plan  Income Tax  Credit.(842)
    1. This credit is for certain employees who begin providing health insurance to their employees.  Credit up to $2500.  
       
       
31.  Small Employer Qualified Wellness  Program Income Tax Credit.(843)
    
    
32. Alternate Fuel Vehicle Manufacturing Income Tax  Credit (845) 
    
    
33. School Scholarship Income Tax Credit (849) 
    1. 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.
    2. 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.
    3. Must complete IN-SSC and include certification number on tax return.
       
       

34. New Employer Credit (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.