According to the Indiana instructions, the following changes are being made for tax year 2023:
Line 1 of Form IT-40, assumes conformity with the Internal Revenue Code of 1986, as amended and in effect on January 1, 2023. If the 2024 Indiana General Assembly does not conform to the most current changes to the Internal Revenue Code, you may be required to amend your tax return later to reflect any differences between Indiana and federal law. You can check the DOR’s homepage at www.in.gov/dor for updates.
What's new for Credits?
- A new credit is available for qualified investments at a mine reclamation site.
- Indiana’s Earned Income Tax Credit (EITC) - Indiana EITC is now 10% of federal EITC. Taxpayers may now claim up to three qualified children on Schedule IN-EIC.
- Indiana’s CollegeChoice 529 Education Savings Plan Credit - The maximum credit amount has increased. Indiana now allows contributions made after December 31, but no later than April 15, to be used to claim a credit on either the current tax year or previous tax year returns.
- Credit for Taxes Paid to Other States - If you paid a pass through entity tax similar to Indiana’s Pass Through Entity Tax (PTET), you may claim a credit for those taxes in the same manner as if you had paid those taxes.
- Credit for Indiana Pass Through Entity Tax (PTET) Paid - If you are a taxpayer who is a partner in a partnership or a shareholder of an S corporation that has elected to pay PTET, the entity owner
is entitled to a refundable credit. This credit is also available to owners of pass-through entities that pass along PTET from another entity.
What's new with Add-Backs (Additions)?
- An add back (151) has been created for certain modifications required to be applied against a net operating loss resulting from an excess business loss.
- Another add back (153) has been implemented for certain modifications related to net operating losses permitted as a result of excess inclusion income.
- Add back (154) was implemented for specified research and experimental expenses required to be amortized for federal income tax purposes.
What's new for Deductions?
- Small Employer Health Insurance Premium Deduction (639) - This new deduction allows for taxpayers to deduct the portion of small employer health insurance premiums that is disallowed for federal purposes because of claiming the credit under IRC section 45R.
- Specified Research and Experimental Expenses Deduction (641) - IT-40 booklet states "If you claimed a federal income tax deduction for specified research and experimental expenses that are required to be amortized for federal purposes pursuant to IRC section 174, deduct the amount of expenses paid or incurred in the current taxable year for federal income tax purposes"
- Career Scholarship Account Deduction (642) - You can now deduct a portion of your scholarship distribution up to the amount of what was included in your federal adjusted gross income.
- National Guard and Reserve Component Members Deduction (621) - now exempts all military pay for members of a reserve component of the armed forces of the United States or the National Guard from the income tax for taxable years beginning in 2023 and thereafter.
- Additional Depdendent Child Exemption - If a taxpayer is claiming a child dependent for the first taxable year in which the exemption is allowed, the taxpayer is permitted to claim an amount of $3,000, instead of $1,500 for one tax year. You cannot claim the $3,000 exemption if the child could have been claimed for the $1,500 exemption in any previous year, regardless of whether the child had been claimed.
- The Individual Income Tax Rate for tax year 2023 has been lowered to 3.15%.
To view the full list of changes, please see page 3 of IT-40 Instructions.