Indiana Other Deductions
Civil Service Annuity Deduction
This deduction has increased to $16,000 effective tax year 2016.
The income on line 1 of Form IT-40 may include federal civil service annuity payments. If it does you may be eligible to take a deduction if you were at least 62 years of age by the end of the tax year and/or a
surviving spouse of a civil service annuitant. For each qualifying individual, the deduction is limited to:
• the lesser of the amount of taxable civil service annuity income included in federal adjusted gross income or $16,000,
• less all amounts of Social Security income and Tier 1 Railroad Retirement income (issued by the Railroad Retirement Board) received by the qualifying individual (as reported on Form 1040, line 20a, or Form 1040A, line 14a).
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 $16,000 ............................... $6,000
* Social Security benefits/RR Income .................... - $1,200
* Allowable deduction ............................................ $4,800
If you and your spouse both received civil service annuities, you may each take this deduction for a maximum of $16,000 per qualifying person. Each of you must figure your deduction separately.
For more information about this deduction, see IT-40 Instructions on page 18.
Disability Retirement Deduction
To take this deduction you must have:
* Been permanently and totally disabled at the time of retirement,
* Retired on disability before the end of the tax year and
* Received disability retirement income during the tax year.
If you meet these qualifications, you must complete Schedule IT-2440 and have it signed by your doctor to claim this deduction. Schedule IT-2440 must be attached to your tax return when claiming 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.
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. Use this website to look up contact information for a particular enterprise zone: www.aiez.org/directory.html. Your employer will provide Form IT-40QEC to you if you are eligible to claim this deduction. The amount of the deduction is one-half (½) 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 attach Form IT-40QEC to the Form IT-40 to support any claimed deduction.
Human Services Deduction
The human services deduction is intended to eliminate any individual income tax imposed on Medicaid recipients who are living in a:
* skilled nursing facility,
* intermediate care facility,
* licensed county home,
* licensed boarding or residential home or
* certified Christian Science facility.*
The goal of the human services deduction is to reduce the affected individual’s adjusted gross income tax liability to zero.
*An eligible Christian Science facility must be listed with and certified by the Commission for Accreditation of Christian Science Nursing Organizations/Facilities, Inc. 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 are 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 a 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.
Indiana Lottery Winnings Deduction
This deduction no longer available effective tax year 2016. You may still claim the deduction if you are filing a prior year return. If you win any prize money from the Indiana Hoosier Lottery Commission, either by winning an instant game, an online game such as Hoosier Lotto, Powerball, Lucky 5, Daily 3 & 4, Max 5, etc., you must report those winnings as income on your federal income tax return. Most of these winnings are fully taxable by Indiana. However, some of the winnings may be exempt from Indiana tax. Also, annuity payments received for drawings held before July 1, 2002, are exempt from Indiana tax.
Note: Winnings from other state lotteries, Indiana pari-mutuel horse races or out-of-state tracks, Indiana and out-of-state riverboats and other gambling winnings, are fully taxable in Indiana and should not be deducted from your taxable income.
Indiana Net Operating Loss Deduction
You may take a deduction for the Indiana portion of the federal net operating loss deduction reported on federal Form 1040. (This will be a net operating loss deduction from an earlier year(s) carried forward to 2016.) Write the amount you deduct as a positive figure.
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.
Indiana Partnership 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 on 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 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 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.
Law Enforcement Reward Deduction
This deduction is no longer available effective tax year 2016. You may still claim the deduction if you are filing a prior year return. If you reported an amount you received as a reward as “other income” on line 21 of your Federal Form 1040, you may be eligible for this deduction. If you received a reward for providing information to a law enforcement official or agency; if the information assisted in the arrest, indictment or the filing of charges against a person; and, if you are not compensated for investigating crimes, the person convicted of the crime or the victim of the crime; then you can deduct the lesser of the amount received or $1,000.
Medical Care Savings Account Deduction
This deduction is no longer available effective tax year 2016. You may still claim the deduction if you are filing a prior year return. You may be eligible for a deduction if your employer deposited funds in certain medical care savings accounts. If you received Form IN-MSA from the account provider you should deduct any medical withdrawals and exempt interest income reported in Box 2 and/or Box 7.
Note: You are not eligible to claim this deduction if you also claimed a medical savings account deduction on federal Form 1040.
Recovery of Deductions
If you did not complete the “other income” line on the Federal 1040 then do not complete this line. Generally, Indiana does not allow you to claim itemized deductions from Federal Schedule A. However, if you reported recovered itemized deductions as “other income” on line 21 of your Federal Form 1040, enter that amount as a deduction on this line.
The recovery is a return of an amount you deducted in an earlier year. The most common recoveries are refunds, reimbursements and rebates of deductions previously itemized on Federal Schedule A.
National Guard and Reserve Component Members Deductions
There is a deduction available for certain members of the reserve components of the armed forces and the Indiana National Guard. To be eligible you must be a member of the reserve components of:
* the Army,
* the Navy,
* the Air Force,
* the Coast Guard,
* the Marine Corps,
* the Merchant Marine.
Or, a member of:
* the Indiana Army National Guard, or
* the Indiana National Guard.
If you are eligible, your deduction is the qualified military income* received as a result of service on involuntary orders:
* During the period you were deployed or mobilized for full time service, or
* During the period your Indiana National Guard unit was federalized.
Note: Military income received due to service 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 this deduction.
Qualified military income is military wages paid:
* to a member of a reserve component of the armed forces of the Indiana National Guard,
* for a period during the member's full-time service on involuntary orders in a reserve component of the armed forces or the period when Indiana National Guard unit was federalized.
Note: You cannot claim both this deduction and the Military Service deduction based on the same income.
Olympic/Paralympic Medal Winners Deduction
You are eligible for a deduction if you won a gold, silver and/or bronze medal from participating in the Olympic/Paralympic games. The deduction equals the value of the medal(s) won plus the amount of income received during the taxable year from the United States Olympic Committee as prize money for winning the Olympic medal(s).
Qualified Patents Income Exemption
Some of the income from qualified patents included in federal taxable income may be exempt from Indiana adjusted gross income tax. A qualified patent is a utility patent or a plant patent issued after Dec. 31, 2007, for an invention resulting from a development process conducted in Indiana. The term does not include a design patent. The exemption includes licensing fees or other income received for the use of the patent, royalties received for the infringement, receipts from the sale of a qualified patent, and income from the taxpayer's own use of the patent to produce the claimed invention.
For more information about this deduction, see Income Tax Information Bulletin #104.
Solar Powered Roof Vent or Fan Deduction
This deduction is no longer available effective tax year 2016. You may still claim the deduction if you are filing a prior year return. An Indiana resident may be eligible for a deduction up to $1,000 if a solar powered roof vent or fan was installed on a building owned or leased by the individual. A solar powered roof vent or fan is a roof vent or fan that is powered by solar energy and used to release heat from a building. The deduction must be claimed in the installation year, and is limited to the smaller of either one-half of the amount paid for labor and materials for the installation of a solar powered roof vent or fan, or $1,000. When claiming this deduction, maintain with your records the following information (which may be required as proof at a later date):
* the installation date(s).
* proof of your costs for the installation of a solar powered roof vent or fan, and
* a list of the persons or corporation that supplied labor or materials for the installation of the solar powered roof vent or fan.
Railroad Unemployment and Sickness Benefits
Benefits issued by the U.S. Railroad Retirement Board are not taxable to Indiana. Deduct unemployment and/or sick pay benefits issued by the U.S. Railroad Retirement Board on this line if:
* you included these benefits as taxable income on your federal tax return, and
* you did not already deduct these benefits on Schedule 2, line 5 and/or 6.
Do not include any supplemental sick pay benefits on this line. Make sure to keep the statements issued (such as the 1099G) as they may be requested at a later date.
Private School/Homeschool Deduction
You may be eligible for a deduction based on education expenditures paid for each dependent child who is enrolled in a private school or is home schooled.
Dependent Child Qualifications
* Your dependent child must be eligible to receive a free elementary or high school education (K-12 range) in an Indiana school corporation;
* You must be eligible to claim the child as a dependent on your federal tax return; and
* The child must be your natural or adopted child or, if not, you must have been awarded custody of the child in a court proceeding making you the court appointed guardian or custodian of the child.
Education Expenditure. This refers to any expenditures made in connection with enrollment, attendance, or participation of your dependent child in a private elementary or high school education program. The term includes tuition, fees, computers, software, textbooks, workbooks, curricula, school supplies (other than personal computers), and other written materials used primarily for academic instruction or for academic tutoring, or both. The term does not include the delivery of instructional service in a home setting to your dependent child who is enrolled in a school corporation or a charter school.
A "private elementary or high school education program" means attendance at a nonpublic school (including a private school, parochial school and a home school) in Indiana that satisfies a child's obligation for compulsory attendance at a school. The obligation for "compulsory attendance" means a child must be in attendance in a school (public and/or private) for a minimum of 180 days in a calendar year.
Note: No deduction will be available based on a child who is enrolled in school for a period of less than 180 days in a calendar year.
Figuring Your Deduction. If you made an unreimbursed education expenditure during the taxable year your deductions is:
* $1,000; multiplied by
* the number of qualified dependent children for whom you made education expenditures.
Note: A qualifying child may be claimed for this deduction only once per year. For example, if a husband and wife are married and filing separately, whichever parent is eligible to claim the child as a dependent for exemption purposes is eligible to claim this deduction.
For more information about this deduction, see Income Tax Information Bulletin #107.