Indiana has made the following changes to the tax laws for 2021
Your Indiana Adjusted Gross Income will conform to the Internal Revenue Code for federal changes adopted after March 31, 2021. If the 2021 Indiana General Assembly does not conform to the most current changes to the Internal Revenue Code, you may have to amend your tax return at a later date to reflect any differences between Indiana and federal law. It may benefit you to check the Indiana Department of Revenue page periodically for updates.
- A new add-back is available for adding back student loan payments made by employers and excluded from the employee’s income.
- A new add-back is available for the addback of certain meal expenses and for which a deduction is allowable in determining federal adjusted gross income.
- A new add-back is available for adding back student loan debt that has been excluded from federal gross income.
- A new credit (865) is available for EDGE credits based on nonresident employees working in Indiana.
- Public School Educator Expense Credit - Expenses for certain COVID-19 protective items are not allowed when calculating this credit.
- The School Scholarship Tax Credit Contribution ceiling has increased.
- Lake County Residential Property Tax Credit - Married individuals who file separately are now subject to credit allowances and phase-outs equal to one-half the allowance for other individuals.
- Foster Care Credit. A new credit for donations to qualifying foster care organizations was enacted in 2021. However, the contributions are not allowed on 2021 returns, so you will need to wait until you file a 2022 return to claim this credit.
- Married Filing Separately (MFS) Individuals. Married individuals filing separately are subject to special rules for the following deductions: Partnership Long-Term Care Policy, Premium Deduction, Renter’s Deduction, Property tax deduction, and Disability retirement deduction.
- New deduction 634 is available to deduct expenses for which a deduction is not permitted for federal income tax purposes because an employer claimed a COVID-related employee retention credit.
- New deduction 636 is available to deduct interest and other amounts included in federal gross income and received from bonds issued by Indiana government.
- Starting in 2021, you must compute your net operating loss deduction without any itemized deductions otherwise allowable in computing your federal net operating loss.
- Injured spouse or spouse who claims to not be liable for all or part of a tax liability. if you are married filing jointly and want to file with one of these designations, see Schedule 7, line 5
instructions on page 55.
To view the full list of changes, please see page 3 of IT-40 Instructions.