- Military issues, including residency issues, filing due dates, deductions, credits
- Filing for an extension
- Understanding military retirement or survivor's benefits deduction
- Combat zone issues
- Choosing your income tax form
- Reporting your spouse's income
- Owing Indiana county tax
- Collection of Outstanding Debts
Combat Zone Issues
Filing due dates and extensions of time to file for military servicemembers serving in a combat zone
- Military servicemembers serving in a presidentially-declared combat zone have an automatic extension of time to file of 180 days after they leave the combat zone.
- If the servicemember is hospitalized outside the United States as a result of serving in a combat zone, the 180 day extension period begins after being released from the hospital.
- The spouse of a military servicemember serving in a combat zone must file the Indiana return using the same filing status as was used when they filed their federal return:
If the servicemember is married and filing jointly for federal tax purposes, then they must file a joint Indiana return. If they are married and filing separately for federal tax purposes, then they must file a separate Indiana return.
When filing the return, write "Combat Zone" across the top of the form (above your Social Security number).
Note: Valid extensions are only for filing purposes. Interest will be due on any tax that remains unpaid during the extension period.
Important: If you were an Indiana resident at the time you enlisted in the military service, Indiana will be your home of record; you are considered to be a full-year Indiana resident for state income tax purposes during your enlistment regardless of where you are stationed, and all of your income will be taxed by Indiana.
Choosing Your Income Tax Form
You have special filing considerations if Indiana is your military home of record. Read the following to see which set of circumstances fits you.
- If you are single, file Form IT-40.
- If you are married and:
- Filed a separate federal income tax return, file a separate Indiana return on Form IT-40;
- Filed a joint federal income tax return, and your spouse is also a full-year Indiana resident, file Form IT-40; or
- Filed a joint federal income tax return, and your spouse is either a part or a full-year Indiana nonresident, file Form IT-40PNR. This form will help you to separate the income to be taxed by Indiana.
Reporting your spouse's income
If your spouse maintains their Indiana residency during your enlistment, all of their income will be taxed by Indiana, regardless of where you are stationed.
Example 1: You and your spouse were stationed in Indiana all year. Both you and your spouse's total taxable income will be taxed by Indiana.
Example 2: You and your spouse were stationed in Virginia. As long as your spouse maintains his/her Indiana residency, all of your joint income will be taxed by Indiana.
Note: If Virginia taxes some or all of your spouse's income, you will be allowed to claim a credit for taxes paid to other states on your Indiana return.
If your spouse is a part or full-year Indiana nonresident, see Example 3 to help determine the amount of income subject to tax by Indiana.
Example 3: You and your spouse are stationed in California. Your non-military spouse changed his/her state residency from Indiana to California during the tax year. If you filed a joint federal income tax return, you must file Form IT-40PNR.
- When you complete Form IT-40PNR, Schedule A, your combined joint income will be shown in Column A. The income your spouse earned before changing his/her residency to California plus any other income received from Indiana sources (such as partnership or S corporation income), plus your income, will be reported in both Columns A and B.
- Then, complete Schedule IN-2058SP*, Nonresident Military Spouse Earned Income Deduction, to figure the amount of your spouse’s income that is exempt from Indiana income tax.
Note: If you filed separate federal income tax returns, you will file Form IT-40, and your spouse will file Form IT-40PNR.
Example 4: You and your spouse are stationed overseas. Your spouse is also in the military, with a Montana home of record. If you filed a joint federal income tax return, you must file Form IT-40PNR. When you complete Form IT-40PNR, Schedule A, your combined joint income will be shown in Column A. Any income your spouse earned from Indiana sources (such as partnership or S corporation), plus your income, will be reported in Column B. Then, complete Schedule IN-2058SP*, Nonresident Military Spouse Earned Income Deduction, to figure the amount of your spouse’s income that is exempt from Indiana income tax.
Note: If you filed separate federal income tax returns, you will file the Form IT-40. Your spouse will not be required to file a Form IT-40PNR with Indiana unless they received income from Indiana sources.
*Nonresident military spouse earned income deduction. A spouse of a nonresident military servicemember may not owe tax to Indiana on earned income from Indiana sources.
The spouse may be eligible to claim a deduction if:
- Indiana is not the military servicemember’s state of domicile as reported on the servicemember’s Form DD-2058;
- The military servicemember and spouse are domiciliaries of the same state;
- The military servicemember is in Indiana on military orders;
- The military servicemember’s spouse is in Indiana in order to live with the servicemember, and resides at the same address; or
- The military servicemember and spouse live together in a state other than Indiana, but the servicemember’s spouse works in Indiana; and
- The Indiana-source income is included on Indiana Schedule A on line 1B, 2B and/or 7B.
To claim this deduction you must enclose a completed Schedule IN-2058SP.
Owing Indiana county tax
Indiana military personnel have special county tax filing considerations. See which of the following examples applies to you.
Example 5: You are single and you enlisted in the military service during the tax year. You were an Elkhart County resident on January 1 of that year. You will file Form IT-40 as a full-year resident and will show Elkhart as the county where you lived on January 1. You will owe Elkhart county tax at the resident rate.
Example 6: You are single and you were stationed outside Indiana before the first of the year. You will not owe an Indiana county tax. Enter "00" (indicating out-of-state) as the 2-digit county code number in the county information boxes at the top of your tax return.
Note: Examples 7 through 9 apply if you are married and filing a joint Indiana income tax return.
Example 7: You were a Daviess County resident at the time you enlisted. Your spouse maintains his/her Indiana residency. Daviess County will be your county of residence while you are stationed in Indiana. You will owe Daviess County tax at the resident rate.
Example 8: You were a Marion County resident at the time you enlisted. Your spouse maintains his/her Indiana residency. You and your family have been stationed outside Indiana for the last few years. You and your spouse's county of residence as of January 1 will be considered to be "out-of-state". You will owe no county tax. Enter "00" (indicating out-of-state) as the 2-digit county code number in the county information boxes at the top of your tax return.
Example 9: You were an Indiana resident at the time you enlisted. Your spouse maintains his/her Indiana residency. If you are stationed outside Indiana, but your spouse maintains a household in Indiana, your county of residence as of January 1 will be considered to be the same as your spouse's. Therefore, you will owe tax to that county on your income.
Note: If you have a military personnel question that is not answered here, please contact us via phone.
Collection of Outstanding Debts
The federal and Indiana Servicemembers Civil Relief Acts (SCRA) allow the Department to assist active duty military members with the penalty, interest and, if materially affected, the collection activity for outstanding tax debts.
- Active duty, full-time, servicemembers of the Army, Navy, Air Force, Marine Corps, and Coast Guard;
- Commissioned corps of the NOAA and the Public Health Service if in active duty service status;
- National Guard if called to active service for more than 30 consecutive days for purposes of responding to a national emergency and supported by federal funds; and
- Indiana only: National Guard members that are ordered to active duty.
- Income tax that becomes due before or during military service.
- Materially affected servicemembers
- Penalty and interest will not be assessed on your income tax liability and collection activity will temporarily cease for the time period between the active duty start date and up to 180 days after the active duty termination or release date.
- Not materially affected servicemembers
- Ensure that the maximum interest rate on a tax liability that is incurred before entering military service is no more than 6% during military service
How do you qualify?
- You must notify the Indiana Department of Revenue if you believe you qualify for this.
- You must submit a copy of your orders, your DD214 and/or a SCRA certificate, along with any other documentation that you have regarding your active duty status and the outstanding debt.
- The Department will consider all relevant facts and circumstances in determining whether a servicemember’s ability to pay is materially or not materially affected by their active duty status.
- All information must be submitted to the following address:
Taxpayer Advocate Office
Indiana Department of Revenue
PO Box 6155
Indianapolis IN 46206-6155