Commonly Claimed Deductions and Credits

January 25, 2015

Many taxpayers are eligible to claim credits and deductions when filing their taxes.

Indiana deductions are used to reduce the amount of income Indiana will tax. If you’re eligible for any deductions, you’ll claim them when you file your Indiana income tax return. For a list of all Indiana deductions, click here.

A credit reduces tax due dollar-for-dollar and could result in a refund. For a list of all Indiana credits, click here.

Commonly Claimed Deductions:

Residential Homeowner’s Property Tax Deduction

You may be eligible to take a deduction of up to $2,500 of the Indiana property taxes (residential real estate taxes) paid during the year on your principal place of residence.

Note: Your “principal place of residence” is the place where you have your true, fixed home and where you intend to return after being absent. Property tax paid for summer homes or vacation homes is not deductible.

Renter’s Deduction
You may be eligible to take a deduction of up to $3,000 of the rent paid on your Indiana home.

Note: You cannot claim this deduction if the rental property was exempt from Indiana property tax.

Social Security Benefits
All social security benefits and/or railroad retirement benefits (issued by the Railroad Retirement Board) included in the income taxed on your federal income tax return should be deducted on your Indiana tax return.

For more information about this deduction, view Information Bulletin #26.

Interest on U.S. Obligations
If you’ve included any interest from U.S. government obligations on your Indiana tax return, you’re eligible for a deduction.

For more information about this deduction, view Information Bulletin #19.

Commonly Claimed Credits:

State and County Tax Withheld

Claim the Indiana state and Indiana county tax withholding amounts as credits when you file your Indiana income tax return. These amounts may be found on any of the following forms:

  • W-2: Wage and Tax Statement
  • W-2G: Certain Gambling Winnings
  • 1099-G: Certain Government Payments
  • 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, etc.
  • 1099-MISC: Miscellaneous Income
  • WH-4852: Indiana Substitute for Form W-2 or Form 1099-R (Indiana form)

Note: Do not claim non-Indiana locality withholding amounts on your Indiana income tax return. You’ll need to contact those states/localities for instructions on how to claim those credits.

Earned Income Credit
You may be eligible for Indiana’s earned income credit if you have claimed an earned income credit on your federal tax return. Detailed instructions can be found in the IT-40 instruction booklet.

Credit for Taxes Paid to Other States
Indiana residents must report all income that is reported for federal income tax purposes on their Indiana individual income tax return. This includes income from sources outside Indiana. When this happens, individuals may be subject to individual income tax by both their state of residence and the state where the income originated. Indiana has entered into agreements with several states to eliminate the requirement of paying tax to two states on the same income. Tax treatment of out-of-state income depends upon the types of income and the state from which the income is derived.

See Information Bulletin #28 and the IT-40 instruction booklet for details on how to figure and claim this credit.

College Credit
If you donated money or property to an Indiana college or university, you may be eligible to take a credit.

Note: Tuition paid to a college or university is not a contribution and does not qualify for this credit.