The Indiana General Assembly made some changes to tax laws that may help our individual income tax clients from that state. As with many states, the starting point for Indiana income taxes is the federal Form 1040. Indiana then adds in various expenses that are deductible on the 1040, but are not deductible in Indiana. The state Legislature recently eliminated several of those “add back” items, which, in effect, passes the federal deduction into the state returns of Indiana taxpayers.
The requirement to add back these deductions (below) has been eliminated and is retroactive to Jan. 1, 2013, the state Department of Revenue says. In short, taxpayers do not have to report them in state returns after the 2012 tax year.
- Educator expense
- Employer-provided educational expenses
- Qualified environmental remediation costs
- Oil and gas well depletion
- Qualified electric utility amortization
- RIC dividends to nonresident aliens
- Start-up expenditures
- Student loan interest
These add-backs were eliminated retroactive to Jan. 1, 2012 , which means they are not required to be added back after the 2011 tax year.
- IRA charitable distribution add-back
- Motorsports entertainment complex expense
- Qualified advanced mine safety equipment expense
- Qualified leasehold improvement property expense
- Qualified restaurant property expense
- Qualified retail improvement property expense
- Qualified transportation fringe expense
- Tuition and fees deduction
If you reported any of the these eight add-backs on your 2012 state tax return, you may be eligible for a refund or a tax reduction. See page 14 of the2013 IT-40 instruction booklet for details.
The state legislature made a few other changes for individuals.
- The automatic taxpayer refund credit is not available for the 2013 tax year.
- The School Scholarship Credit can now be carried forward for nine years after the unused credit year, and the cap on this credit has increased from $5 million to $7.5 million.
- The Coal Combustion Credit has been repealed.
The Indiana Department of Revenue also has changed some forms involving county taxes. The full-year, resident county tax schedules CT-40 and CT-40EZ have been simplified. Also, the tax rates listed on the back of the schedules no longer include the nonresident rates. All 92 counties now have some level of income taxes.
All the 2013 individual forms and booklets are now available on the department’s website at www.in.gov/dor/4878.htm.
For more information about these legislative changes and more, see the 2013 Legislative Synopsis.
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