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Individual Income Tax Overview

General Tax Information

Tax Deduction vs. Tax Credit?

A tax credit and a tax deduction both work to reduce the total amount of tax you pay.

Deductions reduce the amount of your income that is taxable. For example, the renter’s deduction in Indiana reduces the taxable income of a person who pays rent for his home by a maximum of $3,000. The renter would subtract the amount he paid for rent, or $3,000 (whichever is less) from his income. See more information on the renter’s deduction.

Once you have determined the taxable income you received for the year, you may be able to apply tax credits. Tax credits reduce the amount of the tax you must pay. For example, if you made a charitable contribution to an Indiana college or university (tuition is not a charitable contribution), you can subtract one-half of the contribution or $100—whichever is less—from the amount of the Indiana adjusted gross income tax that you owe for the year. See more information on the Indiana College Credit.

Residency status

There are several types of Indiana income tax returns available for individuals to file. The type you need to file is generally based on your residency status. You can determine your residency status by definitions listed below.

Note: If you and your spouse file a joint federal income tax return, you must file a joint tax return for Indiana. If you and your spouse file separate federal income tax returns, you must file separate tax returns for Indiana.

Full-Year Residents

You are a full-year Indiana resident if you maintain your legal residence in Indiana from January 1 through December 31. You do not have to be physically present in Indiana the entire year to be considered a full-year resident. Residents, including military personnel, who leave Indiana for a temporary stay are considered residents during their absence. For example, visiting your out-of-state relatives for a couple of weeks each year won't impact your Indiana residency status; you're still a full-year resident.

Full-year residents must file Form IT-40 for a Indiana Full-Year Resident Individual Income Tax Return.

If you are retired and spend the winter months in another state you may still be a full-year Indiana resident if:

  • You maintain your legal residence in Indiana and intend to return to Indiana during part of the taxable year;
  • You keep your Indiana driver's license; and/or
  • You keep your Indiana voting rights.

For example, Tom and Jane stay at their Florida condominium from Nov. 1 through March 1 each winter, and return to their Indiana home the rest of the year. Since they didn't take steps to become Florida residents (such as registering to vote in Florida, getting a Florida driver's license, etc.), they are full-year Indiana residents for income tax purposes.

Check out the IT-40 instruction booklet for more information.

Part-Year Residents and Full-Year Nonresidents

If you were a part-year resident and received income while you lived in Indiana, you must file Indiana Form IT-40PNR, Part-Year Resident or Nonresident Individual Income Tax Return.

If you were a legal resident of another state (exception: see Full-Year Residents of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin below) and had income from Indiana (except certain interest, dividends, or pension income), you must file Form IT-40PNR. See more information on IT-40PNR instruction booklet.

Full-Year Residents of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin

If you were a full-year resident of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin, and your only income from Indiana was from wages, salaries, tips or commissions then you need to file Form IT-40RNR, Indiana Reciprocal Nonresident Individual Income Tax Return. Note: If you had any other type of income from Indiana, such as farm income, rental income, sole proprietor income, etc., you can't file Form IT-40RNR - you'll have to file the Form IT-40PNR.

Tax Terms Defined

Adjusted Gross Income (AGI): The amount of income to be taxed.

Deduction: Lowers the amount of income to be taxed. Few students qualify for deductions. See individual deductions.

Dependent: In general, you are a dependent of your parent(s) or guardian(s) if they:

  • Financially supported you for more than six months and;
  • You are under the age of 19 at the end of the tax year or;
  • You are under the age of 24 at the end of the tax year and are a full-time student.

Filing due date: Your Indiana individual income taxes must be filed by April 15.

Filing status: The state of Indiana recognizes three filing statuses:

Full-year resident: You maintained a legal place of residence in Indiana from January 1 through December 31. You do not have to be physically present in Indiana the entire year to be considered a full-year resident. Use Form IT-40.

Example: Brittany is a student at Illinois State University. During the school year Brittany lives in Illinois. When school is out she lives with her parents in Fort Wayne, Ind. Brittany is a full-year Indiana resident.

Part-year resident: You established Indiana residency during the year. Use Form IT-40 PNR.

Example: During the year Logan moved to Indiana from Minnesota. He registered his car in Indiana, got an Indiana driver’s license and registered to vote in Indiana. Therefore, Logan is a part-year Indiana resident.

Full-year nonresident: You are a full-year resident of a state (or country) other than Indiana. Use Forms IT-40 PNR or IT-40 RNR.

Example: Sean, who is from Missouri, attends college in Indiana (and pays nonresident tuition). Sean is a full-year nonresident, even though he lives in Indiana for nine months of the year.

Refund: A return of overpaid taxes.

Residency: Your legal place of residence from January 1 through December 31. See filing status to determine the form you need when filing your state income tax return.

W-2: A form supplied by employer(s) no later than January 31 stating the wages earned and taxes paid.

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