Indiana Add-Backs

Although most of the expenses and deductions used to figure your federal taxes are allowed on your Indiana tax return, some do not and need to be “added back” to calculate the correct income used to figure Indiana income tax due. 

For example, interest earned from a direct obligation of a state or political subdivision other than Indiana is taxable to Indiana if the obligation was acquired after Dec. 31, 2011. A taxpayer who received $421 in interest from purchased bonds issued by another state after Dec. 31, 2011, will have to “add back” $421 to the amount of income used to calculate the tax obligation for Indiana.

You must complete your federal tax return (Form 1040, 1040A or 1040EZ)* through the federal adjusted gross income (AGI) line before beginning to figure your Indiana individual income tax return.

 

Add-Back Name

Eligibility

Bonus depreciation add-back

You must make an exception for any bonus depreciation deduction used for property placed in service after Sept. 11, 2001. Bonus depreciation is the additional first-year special depreciation deduction allowed under Section 168(k) of the Internal Revenue Code (IRC).

Net operating loss add-back

Any net operating loss deduction taken on line 21 of your federal Form 1040 must be added back.

Out of state (OOS) municipal obligation interest add-back

Interest earned from a direct obligation of a state or political subdivision other than Indiana is taxable to Indiana if the obligation was acquired after Dec. 31, 2011. Interest earned from obligations held or acquired prior to Dec. 31, 2011, is not subject to Indiana income tax.

Qualified preferred stock add-back

If an individual:

  • Had losses from the sale or exchange of preferred stock in either a Federal National Mortgage Association or Federal Home Loan Mortgage Corporation;
  • Treated the loss from the sale or exchange as ordinary income for federal income tax purposes in the year the loss had been incurred ; AND
  • Had any amount previously added back that had not been allowed as a deduction.

Section 179 expense add-back

If you figured IRC Section 179 expense using a ceiling amount of more than $25,000, you’ll need to add back the difference between it and $25,000.

Tax add-back

If you completed Federal Schedules C, C-EZ, E or F you should figure this add-back.

 

A complete list of add-backs can be found in the current year IT-40 instruction booklet.