Indiana Deductions from Income

Indiana deductions are used to reduce the amount of taxable income. First, check the list below to see if you're eligible to claim any of the deductions. If you are, you'll claim them when you file your annual Indiana income tax return - Form IT-40 or IT-40PNR.

Important: Some deductions available for earlier tax years may not be listed below. Find information on prior tax year deductions on their respective webpages.

Updated January 9, 2018

Deduction

Eligibility

Forms/Schedules

Civil Service Annuity Deduction

You may qualify if your federal form includes federal civil service annuity income and you are at least 62 at the end of the tax year or a surviving spouse

Schedule 2, Schedule C

Disability Retirement Deduction

You may be eligible if you are:

  • permanently and totally disabled at the time of retirement
  • retired on disability before the end of the year and
  • received disability retirement income in the tax year

 

Schedule IT-2440

Enterprise Zone Employee Deduction

Your employer will provide form IT-40QEC if you work in an enterprise zone. You must both live and work in an enterprise zone.

Schedule 2, Schedule C

Human Services Tax Deduction

Any Medicaid recipients who are living in a hospital, skilled nursing facility, intermediate care facility, licensed county home, licensed boarding or residential home, or a Certified Christian Science facility.

Schedule 2, Schedule C

Indiana Lottery Winnings Annuity Deduction

If you are getting annuity payments from a winning Hoosier Lottery ticket for a lottery held prior to July 1, 2002, you may be eligible.

Schedule 2, Schedule C

Indiana Partnership Long Term Care Policy Premiums Deduction

Anyone paying premiums for Indiana partnership long-term care insurance

IT-40

Indiana Net Operating Loss Deduction

You may take this deduction for the Indiana portion of the federal net operating loss deduction (a net operating loss from an earlier year carried forward) or if there is a state-only net operating loss

IT-40NOL

Interest from U.S. Government Obligations Deduction

Any income that is a direct obligation of the U.S. government such as U.S. savings bonds, U.S. Treasury bills and certificates

Schedule 2, Schedule C

Military Service Deduction

Anyone who has income that may include active or reserve military pay. Certain retired military members may also qualify.

Schedule 2, Schedule C

National Guard and Reserve Component Members Deduction

A member of the reserve components of the Army, Navy, Air Force, Coast Guard, Marine Corps or Merchant Marine OR a member of the Indiana Army National Guard or Indiana Air National Guard

Schedule 2, Schedule C

Olympic/Paralympic Medal Winners Deduction

Anyone who won a gold, silver and/or bronze medal from participating in the Olympic/Paralympic games.

Schedule 2, Schedule C

Private school/homeschool deduction

If you have education expenditures for each dependent child who is enrolled in a private school or homeschooled you may be qualified for a $1,000 deduction per qualified child

Schedule 2, Schedule C

Qualified Patents Income Exemption Deduction

Anyone with a qualified patent, that has federal taxable income from a qualified patent may be exempt from Indiana adjusted gross income tax

IN-PAT

Railroad Unemployment and Sickness Benefits Deduction

If you were issued benefits by the U.S. Railroad Retirement Board you may be eligible.

Schedule 2, Schedule C

Recovery of Deductions

Anyone who completed the “other income” line on the federal Form 1040

Schedule 2, Schedule C

Renter's Deduction

Anyone who paid rent on your principal place of residence AND rented a place that was subject to Indiana property tax

Schedule 2, Schedule C

Repayment of Previously Taxed Income Deduction

Anyone who has:

  • reported income to Indiana in a previous year
  • repaid some or all of it this year AND
  • for federal tax purposes is eligible to claim the repayment as an itemized deduction or claim a credit based on the repayment amount

 

Schedule 2, Schedule C

Residential Homeowner's Property Tax Deduction

Anyone who pays property taxes on their principal place of residence in Indiana

Schedule 2, Schedule C

Taxable Social Security and Railroad Retirement Benefits Deduction

Anyone who received Social Security income or railroad retirement benefits that are issued by the U.S. Railroad Retirement Board

Schedule 2, Schedule C

Unemployment Compensation Deduction

Anyone who reported unemployment compensation on your federal income tax return

Schedule 2, Schedule C