What is the Indiana Net Operating Loss Deduction?

You may take a deduction for the Indiana portion of the federal Net Operating Loss Deduction you added back on line 2 of Schedule 1. (This will be a net operating loss deduction from an earlier year(s) carried forward to 2014.) Write the amount you deduct as a positive figure.

Note: It is possible to have an Indiana NOL without also having a federal NOL.

Enclose Schedule A from federal Form 1045 and a completed Indiana Schedule IT-40NOL when claiming this deduction.

Also, maintain with your records a copy of the federal Form 1040 from the loss year as the Department can require you to provide this information at a later date.

What is a nonqualified or qualified withdrawal?

Nonqualified Withdrawal

This is a withdrawal or distribution from a CollegeChoice 529 education savings plan that is
  • not a qualified withdrawal
  • a withdrawal or distribution from an account that is closed within 12 months after the account is opened
  • a rollover distribution or transfer from the CollegeChoice 529 education savings plan to any other Code Sec. 529 plan

Qualified Withdrawal

This is a withdrawal or distribution from a CollegeChoice 529 education savings plan account that is made
  • to pay for qualified higher education expenses
  • because of the death or disability of an account beneficiary
  • because an account beneficiary received a scholarship that paid all or part of their qualified higher education expenses
  • because of a transfer of funds by the plan from one third party custodian to another

What if I worked outside of Indiana?

If you worked in Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin, your wages should be covered by a reciprocal agreement where your wages are treated as Indiana wages and Indiana tax is withheld instead of tax from that particular state.

If you lived in one of these states, select it from the drop-down menu as the county in which you worked. If your W-2 (W2) shows state tax withheld other than Indiana state tax, then you will need to file a state tax return with that particular state.

If you worked in a state other than Illinois, Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin, then select Out-Of-State as the county where you worked.

What defines the county where I lived?

The county where you lived is the county where you maintained your home on January 1, 2014. If you had more than one home in Indiana on this date, then your county of residence as of Jan. 1, 2014, was:
  • Where you were registered to vote. If this did not apply, then your county of residence was
  • Where your personal automobile was registered. If this did not apply, then your county of residence was
  • Where you spent the majority of your time in Indiana during 2014.
Did you move during the year?

If you moved your residence to a different Indiana county during the year (but after Jan. 1, 2014), the county where you lived for tax purposes will not change until next year.

Example. William was a lifelong Scott County resident until he moved to Martin County on March 15, 2014. He will figure Scott County tax when filing his 2014 state tax return. If he still lived in Martin County as of Jan. 1, 2014 he will figure Martin County tax when filing his 2014 state taxes.

What defines the county where I worked?

The county where you worked is the county where your main place of business was located, or where your main work activity was performed on January 1, 2014.

If you began working in another county after January 1, 2014, the county where you worked for tax purposes will not change until next year.

Example. Jessie worked in Marion County on Jan. 1, 2014. She quit that job and began a new one in Johnson County on Feb. 10, 2014. She will enter Marion County as the county where she worked even though she changed jobs during the year.

If you had more than one job on January 1, 2014, your principal place of employment is the job where you worked the most hours and earned the most income.

What if I'm in the military and I was stationed outside of Indiana?

If on January 1, 2014 you were stationed outside of Indiana and your family was with you, select out-of-state as your county of residence. You must also select out-of-state as the county you work in. You will not owe a county tax.

If, however, you maintained your home in an Indiana county and/or your spouse and a family were still living in an Indiana county on January 1, 2014, you are considered a resident of that county and will be subject to county tax.

How much rent can I deduct?

You can deduct up to $3,000 or the amount of actual rent paid. Enter in the full amount of rent you paid. If it is more than $3,000, we will automatically enter $3,000 as the deduction.

Important: Keep copies of your rental receipts, landlord identifying information, and lease agreements as the Department can require you to provide this information.

What is the Insulation Deduction?

If you installed new insulation, weather stripping, double pane windows, storm doors, or storm windows in your Indiana home during 2014, you may be able to take the Insulation Deduction. The maximum amount for this deduction is $1,000.

To take the Insulation Deduction, the following requirements must be met:
  • The insulating items must have been installed in your principal place of residence located in Indiana.
  • The part of your home where the insulating items were installed must have been built before January 1, 2011.
  • The insulating items must be an upgrade and not a replacement or like-kind item (e.g., replacing a double pane window with a new double pane window won't qualify, but replacing a double pane window with a triple pane window will qualify), and
  • The deduction must be taken in the year the insulating items were installed.
You are allowed to deduct up to $1,000 of the actual cost of the qualifying items and labor. You cannot include the cost of labor that you did yourself.

Important: When claiming this deduction, maintain with your records the following information (as the Indiana Department of Revenue may request it at a later date):
  • Item(s) purchased
  • Purchase price
  • Place of purchase
  • Date of purchase
  • Date of installation
  • Amount paid for labor (you cannot include the cost of labor that you did yourself)


For more information about this deduction see Income Tax Information Bulletin #43 on Indiana's Department of Revenue website.

What is the Human Services Tax Deduction?

The Human Services Deduction is intended to eliminate any individual income tax imposed on Medicaid recipients who are living in one of the following:
  • Hospital
  • Skilled nursing facility
  • Intermediate care facility
  • Licensed county home
  • Licensed boarding
  • Residential home
  • Certified Christian Science facility*
The goal of the Human Services Tax Deduction is to reduce the affected individual's adjusted gross income tax liability to zero (0).

Generally, the deduction should not be used in conjunction with most tax credits in order to create a refund.

If you are a Medicaid recipient and live in one of the facilities listed above, to determine whether you're eligible for the deduction, you must first prepare your tax return without claiming a Human Services Deduction.

Generally, if a refund is due, you are not eligible for this deduction. File your return without claiming the deduction and a refund will be issued. However, if an amount is due, you are eligible to use a deduction.

*An eligible Christian Science facility must be listed with and certified by the Commission for Accreditation of Christian Science Nursing Organizations/Facilities, Inc.

What is the Long-Term Care Policy Premiums Deduction?

You may take a deduction for the amount of premiums paid for Indiana partnership long-term care insurance.

Important: The Indiana partnership policy will have the following box of information on the outline of coverage, the application, or the front page of the policy:

This policy qualifies under the Indiana Long-Term Care program for Medicaid Asset Protection. This policy may provide benefits in excess of the asset protection provided in the Indiana Long-Term Care program.

If the information shown in the box above is not located in a box on your policy, you do not have a qualifying policy, and are not eligible to take this deduction.

The deduction is the amount of premiums paid during the year on the policy for the taxpayer and/or spouse.

No double benefit is allowed. Certain self-employed individuals will claim these premiums as a deduction on the front page of federal Form 1040. The Indiana deduction will be the actual amount of these premiums paid, minus any amount of these already reported on federal Form 1040.

Example: Sam paid $4,500 in Indiana Partnership long-term care premiums. He deducted $1,360 of that amount as an expense on his federal Schedule C. He is eligible to deduct the $3,140 difference ($4,500 - $1,360) on Indiana Schedule 2 under line 11.

Important: Keep a copy of the premium statements as the Department can require you to provide this information.

More information about this program is available at Indiana's Department of Revenue website.

What is the Military Service Deduction?

If income included in your federal adjusted gross income on your federal return includes active or reserve military pay received by you, you will be eligible to take a deduction (regardless of your age).

Also, if you are retired from the military or are the surviving spouse of a person who was in the military, and you included military retirement income on your federal tax return, then you may be eligible for this deduction if you meet the following requirements:
  • You were at least 60 years of age by December 31, 2014.
  • You were receiving military retirement or survivor's benefits in 2014.
  • The total benefits received as retirement income were reported on your federal return.

Your deduction will be the actual amount of military income received (i.e. military pay, retirement pay and/or survivor's benefits) or $5,000, whichever is less. If both you and your spouse received military income, each of you may claim the deduction of up to $5,000 for a maximum of $10,000.

Important: If you served in the Indiana National Guard or the reserve component of the armed forces during 2014, please refer to the National Guard/Reserve deduction on this screen.

Note: Military income earned while in a combat zone is not taxable on your federal or state income tax returns. Since Indiana is not taxing this income, your combat zone income is not eligible for a deduction.

Example. Jim was on active duty the first month of the year. He was stationed in a combat zone the rest of the year. His military W-2 (W2) form shows regular military wage income of $950, and $19,000 income earned while being stationed in a combat zone. Only $950 of his income is taxed on his federal return; likewise, Indiana will only initially tax $950. Jim should claim a $950 military deduction (the lesser of the income being taxed [$950] or $5,000).

Note: If you received a combination of military pay, retirement pay and/or survivor's benefits during the tax year, the total deduction cannot be greater than $5,000 per qualifying person. For example, if you earned $6,000 in military pay and $1,500 in retirement pay, you can deduct only $5,000 of your military income.

For more information about this deduction see Income Tax Information Bulletins #6 and #27 at Indiana's Department of Revenue website.

What is the Non-Indiana Locality Earnings Deduction?

You may be allowed a deduction if you have income being taxed by a locality (local governmental unit) located in another state. A "locality" could be a city, county, parish, etc.

Example: You earned wages in Louisville, KY. Your employer withheld a Louisville city (locality) tax. Since your wages were taxed by a non-Indiana locality (Louisville), you are eligible to take a deduction.

The deduction is limited. You may deduct the amount of your income that was taxed by a non-Indiana locality or $2,000, whichever is less. If you and your spouse both qualify, you may each claim the deduction for a maximum of $4,000 (limited to no more than $2,000 per person).

For more information see Income Tax Information Bulletin #28 at Indiana's Department of Revenue website.

What is the Disability Retirement Deduction?

To take this deduction you must meet all of the following requirements:
  1. Been permanently and totally disabled at the time of retirement
  2. Retired on disability before December 31, 2014
  3. Received disability retirement income during 2014

If you meet the above requirements, you must complete Schedule IT-2440 and have it signed by your doctor to claim this deduction. This deduction is limited to a maximum of $5,200 per qualifying individual.

Note. Social Security disability income does not qualify for this deduction because Indiana does not tax this income.

For more information about this deduction see Income Tax Information Bulletin #70 and Schedule IT-2440 at Indiana's Department of Revenue website.

What is the Civil Service Annuity Deduction?

If your federal adjusted gross income includes federal civil service annuity payments, you may be able to take a deduction if you were at least 62 years of age by December 31, 2014.

To figure your deduction, take the amount of annuity payments received or $2,000, whichever is less. Then subtract all Social Security and railroad retirement benefits received.

Example. Your civil service annuity is $6,000. Your Social Security income is $1,200. Here's how to figure your deduction:
Lesser of the amount of the annuity ($6,000) or $2,000$2,000
Social Security benefits$1,200
Allowable deduction$800

If you and your spouse both received civil service annuities, you may each take this deduction for a maximum of $4,000 (no more than $2,000 per qualifying person), provided you both meet the age requirement.

This deduction is available only to the annuitant and is not available to the annuitant's beneficiary.

Is rent paid for a summer or vacation home deductible?

No. Rent paid for summer homes or vacation homes is not deductible.

What are examples of property exempt from Indiana property tax?

  • Government owned housing
  • Property owned by a nonprofit organization
  • Student housing
  • Property owned by a cooperative association
  • Property located outside of Indiana

Is property tax paid for summer or vacation homes deductible?

No. Property tax paid for summer homes or vacation homes is not deductible.

How do I find out how much Indiana property tax I paid on my principal residence?

Use one of the following ways to find out how much property tax you paid:
  • Indiana counties send annual statements to homeowners showing how much property tax is due on their property. Add together the 2014 spring and fall installments if you paid both of them. If you received just one installment statement this year for your 2014 property taxes, use the amount paid for that installment.
  • Sometimes mortgage companies pay the Indiana property tax from an escrow account. If your mortgage company pays it, they should send you a Form 1098 (or its equivalent), showing the amount of property tax paid.
  • If you can't locate the information, contact your local county treasurer's office or your mortgage company.

Do I qualify for the Lake County Residential Income Tax Credit?

You qualify for the Lake County (Indiana) Residential Income Tax Credit if you meet all of the following requirements:
  • You paid property tax to Lake County (Indiana) during 2014 on your residence. Your residence is your principal dwelling. You must either own or be buying the residence under contract, and must pay property tax to Lake County (Indiana) on that residence.
  • Your earned income must be less than $18,600. Earned income is the combination of your (and your spouse's, if filing a joint return) wages, salaries, tips, and other compensation. NOTE: Income from pensions, interest, dividends, Social Security, etc., are not classified as earned income.
Example: Sue has $17,000 wage income, $300 interest income and $7,000 pension income. Even though her total income is $24,300, Sue will qualify for the credit because her earned income is less than $18,600 (it is $17,000).

Example. Dale receives $17,000 pension income, $3,000 Social Security income and $100 interest income. He meets the income eligibility requirement because his earned income is less than $18,600 (it is zero).

Note: If you take this credit you will not be able to claim the homeowner's residential property tax deduction. In most cases, the credit is going to be more beneficial than the deduction.

What is the maximum credit allowed for donations to an eligible Indiana college or university?

If you donated money or property to an Indiana college or university, you may be able to take a credit of up to $100 on a single return or $200 on a joint return.

Important. You must maintain documentation of your contributions. The Department can require you to provide this information at a later date.

What are estimated tax payments? What do I enter on this screen?

Do NOT enter any amount of your 2014 Indiana Income Tax withheld by your employer(s) as shown on any wage or tax statements.

Estimated Payments: If you did not have enough Indiana income taxes withheld from your earnings during 2014, you may have made estimated tax payments. These payments count as a credit toward your 2014 Indiana tax liability.

Extension Payment: If you filed for an extension to submit your income tax return, you may have made a tax payment with that extension. This payment counts as a credit toward your 2014 Indiana tax liability.

  • Enter any estimated tax payments you made for 2014.
  • Enter any amounts credited from your 2013 return.
  • Enter any amount prepaid with extension requests.

How is my Indiana use tax figured?

  1. Total purchase price of property subject to the sales/use tax
  2. Sales/use tax: Multiply line 1 by .07 (7%)
  3. Sales tax previously paid on the above items (up to 7% per item)
  4. Total amount due: Subtract line 3 from line 2.

What is the Airport Development Zone Employee Deduction?

Certain areas within Indiana have been designated as airport development zones. If you lived in an airport development zone and worked for a qualified employer in that zone, you may be able to take this deduction.

Your employer will provide you with Form IT-40QEC if you are eligible to claim this deduction. The amount of the deduction is one half of the earned income shown on that form or $7,500, whichever is less.

What is the Enterprise Zone Employee Deduction?

Certain areas within Indiana have been designated as enterprise zones. Enterprise zones are established to encourage investment and job growth in distressed urban areas.

If you lived in an enterprise zone and worked for a qualified employer within that zone you may be able to take this deduction. Your employer will provide you with Form IT-40QEC if you are eligible to claim this deduction.

The amount of the deduction is one-half of the earned income shown on that form or $7,500, whichever is less. If you and your spouse both have received Form IT-40QEC, you may each take this deduction for a combined maximum of $15,000 (no more than $7,500 per qualifying person). You must enclose Form IT-40QEC with the Form IT-40 to support any claimed deduction.

Enterprise zones have been established in areas of certain cities/locations. Use this website to look up contact information for a particular enterprise zone: www.aiez.org/directory.html.

What is the Law Enforcement Reward Deduction?

If you reported an amount you received as a reward as other income on your federal tax return, you may be eligible for this deduction.

You can deduct the lesser of the reward amount or $1,000 if all of the following apply:
  • You received a reward for providing information to a law enforcement official or agency.
  • The information assisted in the arrest, indictment, or the filing of charges against a person.
  • You are not compensated for investigating crimes, the person convicted of the crime, or the victim of the crime.

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