Indiana State TaxesPublished:
Indiana State Tax ? Individual Income Tax
The State of Indiana imposes an income tax at a flat rate 3.4% of federal adjusted gross income (AGI). This applies to all residents, nonresidents (with income from Indiana sources), estates, and trusts ? partnerships are exempt.
In general, you must file an Indiana individual income tax return if either of the following applies:
- You lived in Indiana and received income greater than your Indiana exemptions
- You lived outside Indiana and received income from Indiana sources
Indiana counties have adopted local income taxes which are imposed in addition to the state income tax. There are three different types of alternative county tax:
- County Adjusted Gross Income Tax (CAGIT)
- County Option Income Tax (COIT)
- County Economic Development Income Tax (CEDIT)
Indiana individual income tax returns are due by April 15th following the end of the taxable year (for calendar year filers).
If you cannot file by the due date, you may request an extension of time by submitting Form IT-9 (Application for Extension of Time to File). This form must be filed with a payment of at least 90% of any tax due by the original due date (April 15th) in order for the extension to be valid.
Indiana State Tax ? Corporate Income Tax
Indiana has three types of corporate income tax:
- Corporate Adjusted Gross Income Tax (AGIT)
- Financial Institution Tax
- Utility Receipts Tax
Corporate Adjusted Gross Income Tax (AGIT)
This tax applies to any corporation doing business in Indiana or earning income from Indiana sources. Corporations are taxed at a rate of 8.5% of their adjusted gross income. Foreign and domestic for-profit corporations that are subject to this tax should file Form IT-20 (Indiana Corporate Adjusted Gross Income Tax Return).
Financial Institution Tax
This is a franchise tax that applies to the adjusted gross income of any entity transacting the business of a financial institution in Indiana. Companies that are subject to the financial institution tax are exempt from the AGIT. The financial institution tax also has a rate of 8.5%. Form FIT-20 is the Indiana Financial Institution Tax Return.
Utility Receipts Tax
This tax is imposed on any corporation providing utility services in Indiana ? including electrical energy, natural gas, water, steam, sewage, or telecommunications services. The tax rate is 1.4% of gross receipts from all utility services consumed in Indiana. Businesses that provide these services should file Form URT (Indiana Utility Receipts Tax Return).
Businesses operating in Indiana must be registered with the Department of Revenue ? this can be done by submitting Form BT-1 (Business Tax Application).
Indiana State Tax ? Sales & Use Tax
The sales and use tax has two components: the sales tax component and the use tax component. These taxes are complementary ? a purchase is subject to one or the other, but not both. Both taxes have the same rate of 7% (effective since April 1, 2008).
The sales tax (or ‘retail sales tax’) applies to the sales of merchandise in Indiana. Tax is collected at the time of sale from consumers by merchants, who must file and remit the tax to the Indiana Department of Revenue.
Sales tax is imposed on the following:
- Any retail sale (including wholesale sales)
- The rental or lease of tangible personal property
- The rental or furnishing of lodgings (for periods less than 30 days)
- The rental or furnishing of booths, display spaces, banquet facilities, or other similar accommodations
- The furnishing of certain utility or cable TV services
- The storage, use, or consumption of tangible personal property within the State of Indiana
In general, the sales of food (groceries) and prescription drugs are exempt from tax.
The ‘use tax’ applies to purchases from out-of-state sellers when merchandise is delivered to Indiana for use in the state, and when Indiana sales tax has not been properly collected. Use tax must be paid directly to the Department of Revenue by the consumer ? individuals may use Form ST-115 (Consumer’s Use Tax Return).
Indiana State Tax ? Property Tax
Property taxes in Indiana are administered by local governments with oversight by the Indiana Department of Local Government Finance (DLGF), which reviews and approves tax rates and ensures that proper rules/procedures are followed.
There are two main types of property: real property and personal property. Real property (i.e. real estate) generally includes land and buildings. Personal property can be tangible or intangible ? tangible personal property refers to moveable property such as furniture or equipment; intangible personal property includes assets like stocks and bonds. Indiana imposes tax on some tangible personal property, such as equipment used in the production of income or held as an investment, billboards, foundations for the equipment, and other tangible property that is not real estate. Indiana does not tax intangible personal property (e.g. computer application software) or inventory.
Real property is taxed according to its assessed value. Local officials assess the value of real property every year (on March 1) based on market value. The sum of all assessed values of property in a county determines the county’s ‘net assessed value.’ Once the county establishes how much revenue needs to be raised (for local government/public services), that amount is divided by the net assessed value to determine the property tax rate. The equation looks like this:
- TAX RATE = Estimated of funds to be raised ÷ Net assessed value
Property taxes are paid in ‘arrears,’ this means that the tax paid in the current year represent the taxes owed for the previous year. Property tax bills are calculated by the County Auditor and mailed out by the County Treasurer twice a year. Payments are due annually in two installments on May 10th and November 10th.
If a property owner disagrees with his/her assessment, an appeal can be made to the Township Assessor within 45 days of receiving the tax notice or bill. Form 130 (Petition for Review of Assessment by Local Assessing Official) can be filed if a taxpayer believes their assessment does not reflect the market value of their home. Form 133 (Petition for Correction of an Error) should be filed with the County Auditor if a taxpayer believes there is an error on their assessment.
Indiana State Tax Forms
Form IT-40EZ (Indiana Income Tax Return for Full-Year Indiana Resident Filers with No Dependents)
Form IT-40 (Indiana Full-Year Resident Individual Income Tax Return)
Form IT-40RNR (Reciprocal Nonresident Indiana Individual Income Tax Return)
Form IT-40PNR (Indiana Part-Year or Full-Year Nonresident Individual Income Tax Return)
Form IT-9 (Application for Extension of Time to File)
Form ES-40 (Estimated Tax Payment Form)
Form IT-40X (Amended Individual Income Tax Return)
Indiana State Tax Resources
Indiana Department of Revenue: www.in.gov/dor
The Indiana Department of Revenue offers I-File, a free and secure online program that allows taxpayers to prepare and file their state tax returns. Individuals who file electronically are likely to get their refunds much faster than those who file by paper. For more information, visit the I-File center: secure.in.gov/apps/dor/ifile/2009
Indiana Department of Revenue ‘New and Small Business Education Center:’ www.in.gov/dor/3939
For a list of local income taxes (organized by county), view the Indiana Departmental Notice #1: www.in.gov/dor/files/dn01
For more information about Indiana’s use tax, read the ‘Use Tax Brochure:’ in.gov/dor/files/business-tax-handbook.pdf
The Indiana Economic Development Corporation (IEDC) is a state agency dedicated to helping businesses grow and thrive in Indiana. Visit their website at: www.in.gov/iedc
For a list of available property tax deductions and the eligibility requirements, visit the following webpage: www.in.gov/dlgf/2344
Indianan Property Tax Calculators: www.in.gov/dlgf/PropTaxCalc
Indiana Department of Revenue Refund Status Service: secure.in.gov/apps/dor/tax/refund
To contact the Indiana Department of Revenue by phone, email or mail, visit the ‘Contact Us’ page: www.in.gov/dor/3325
Indiana Department of Local Government Finance (DLGF): www.in.gov/dlgf
Indiana Tax Court: www.in.gov/judiciary/tax