Credit for Local Taxes Paid Outside of Indiana
If you figured county tax on Form IT-40, line 9, and had to pay a local income tax outside Indiana, you may be able to take a credit. This credit applies only if the tax you paid outside of Indiana was to another city, county, town, or other local government entity, and they did not refund the tax, or give you a credit for Indiana county tax.
The credit can be used to reduce your Indiana county tax if it is the County Adjusted Gross Income Tax or the County Option Income Tax. It cannot be used to reduce any County Economic Development Income Tax.
IMPORTANT: This year Indiana counties were allowed to adopt or increase their local income tax rates through October 31, 2011. This publication was finalized before that date. This means your Indiana county tax rate on the Schedule CT-40 may not be correct. Indiana encourages their taxpayers to contact them in one of the following ways to get an updated list of the rates before filing. To get the updated list, you may:
- Log on to the Department's website.
- Call the form order request line at (317) 615-2581 to have one mailed to you.
- Visit or call a district office.
- Call our main tax line at (317) 232-2240 Monday - Friday, 8a.m. to 4:30p.m., and a representatice will assist you.
If Lake County adopted a tax (find out here), then use the Lake County resident rate.
Tax returns filed using the wrong rates will be adjusted. This may result in a reduced refund, or an increase in the amount you owe.
IMPORTANT: You must enclose either a copy of your W-2's showing the non-Indiana locality amount withheld or a copy of the non-Indiana locality tax return.
Remember, you can use this credit only if you have both:
- A county tax amount on Form IT-40, line 9, and
- A local income tax that you had to pay outside Indiana.