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Category: Indiana

Credit for Local Taxes Paid Outside of Indiana-Offset Credits

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.


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. The W-2 information entered into your TaxSlayer account will be transmitted with your return when e-filing.


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.



Note. See the Combined Limitation on page 39 of IT-40 Booklet

For more information regarding this credit, please refer to the instructions on page 38 of the Indiana IT-40 Booklet.