Hoosiers filing state income taxes find it as easy as spelling 'INDIANA'

Having moved to Indiana from Texas, completing an Indiana state income tax form is one more element of life in the Midwest we are learning about. Please devote a column to the Indiana Form IT-40.

— AD HOC

We'll call today's effort an updated version of a column written two years ago that includes updates and information about being a "Hoosier" state taxpayer. It's our hope this St. Patrick's Day report will save you and other Indiana taxpayers some "green" as we use INDIANA as our template.

Income — the starting point for an IT-40 is the Adjusted Gross Income (AGI) from your Federal 1040 or 1040-SR. Indiana add-backs get a line on the IT-40, but they are as rare as a snow- or pothole-free winter in Michiana.

No-charge preparation is available through several vendors who have their own specific requirements. Go to freefile.dor.in.gov and choose the software most applicable to your situation.

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Deductions allowed include a Renter's Deduction that can trim up to $3,000 from the Indiana Taxable Income computation. The Residential Property Tax Deduction capped at $2,500 is permitted to homeowners. Neither taxable Social Security benefits nor taxable Indiana state income tax refunds are reported to Uncle Sam are deducted on Form IT-40. Moving into its third year on the Form IT-40 is the Private School/Homeschool Deduction, which tallies up to $1,000 per qualified dependent child. Hoosier taxpayers who receive pay for active military duty can reduce their armed forces earnings by up to $5,000 while individuals with military retirement income and/or survivor's benefits may be able to deduct a larger figure. New for 2023 is a National Guard and Reserve Component Members write-off that is fully deductible.

Income tax rate for the state of Indiana is 3.15% — Second-lowest (behind Ohio) in the IMOK (i.e., Illinois, Michigan, Ohio, Kentucky) border states quartet.

All Indiana counties have a local income tax reported on Form IT-40. The rates for readers in the local area: St. Joseph (.0175), Elkhart (.02) and Marshall (.0125). Good news for a taxpayer who moved into Indiana after January 1, 2023: There is no county income tax levied for 2023 during your first year here.

Nice to education. There are four different credits that are education-related. Perhaps the best known is the College Tax Credit, which surfaces on an Indiana tax return for an individual who donated to an Indiana college or university during 2023. This credit uses 50% of the donation as the calculation-base with caps of $100 (Single and Head of Household) and $200 (Married Filing Jointly). Also, if you are paying educational expenses for a K-12 or a college student, consider funding (at least some) of these expenses through Indiana's College Choice 529 Education Savings Plan. There is an immediate 20% tax credit (capped at $1,500, beginning in 2023) for contributions to this plan PLUS tax-free earnings growth. If (worst case scenario) you have to pull money out of the plan a little more than a year later, it is almost like free money back for what you would have paid anyway for your student's education costs. Another education-friendly credit is the Public-School Educator Expense Credit, which allows a dollar-for-dollar credit for the first $100 of non-reimbursed expenses a public-school educator incurs. Indiana is an equal opportunity state as it offers a School Scholarship Credit available for donations to certain scholarship-granting organizations (SGOs) that then donate the funds to private schools. The amount of the credit is based on 50% of the contribution. It isn't education related but don't forget the Unified Tax Credit for the Elderly is available totaxpayers 65 or older who report less than $10,000 as their income. And there is an Indiana Earned Income Credit (EIC) available to those wage-earners who qualify for the Federal EIC.

Always electronically file. Over 90% of Indiana taxpayers e-filed in 2023. The major benefits of using the cyber-space connection include fewer errors, confirmation that the return was received and accepted AND a quicker refund.

Ken & Klee's income tax bulletin board

Here's our usual disclaimer. The information above is an abridged version of the Indiana income tax provisions. Please check the Indiana instructions available at in.gov/dor. Both Federal and Indiana tax returns for 2023 are due on Monday, April 15, 2024. Information about an automatic extension will be the topic of a future column.

Tax Talk is an outreach service of the Notre Dame-Saint Mary’s College Vivian Harrington Gray Tax Assistance Program (TAP).

Rick Klee served as the tax director at the University of Notre Dame from 1998 through August 2019. A retired CPA, Klee is a graduate of Notre Dame. You can contact Rick at rklee@nd.edu.

Ken Milani, a professor of accountancy at Notre Dame, co-founded the TAP and served as its faculty coordinator for 39 years. Contact Ken at milani.1@nd.edu.

E-mail questions to either.

This article originally appeared on South Bend Tribune: Tax Talk: Basics are given to understand Indiana state income tax form