State Taxes
Corporate Adjusted Gross Income Tax
Taxpayer: All corporations doing business in Indiana, except S corporations and not-for-profit organizations.
Tax Base: Federal taxable income with four modifications:
1. Subtract any income that federal law or the Constitution prohibits Indiana from taxing.
2. Add deductions allowed under federal law for charitable contributions.
3. Add deductions allowed under federal law for state income taxes and local property taxes.
4. Apportion income to Indiana based on the average percentage of property owned in Indiana, percentage of payroll paid in Indiana and twice the percentage of sales volume attributable to Indiana.
Tax Rate: 8.5%
Major Deductions and Exemptions: Income of insurance companies that pay the insurance tax. Foreign income of foreign corporations. Financial institutions (see "Financial Institutions Tax").
Research Expense Tax Credit (R & D Tax Credit): Indiana's Research Expense Tax credit (also known as the Research and Development Tax Credit), provides for a tax credit based upon a taxpayer's increased research activities conducted in the State of Indiana. The credit is 10% of the increase in qualified research expenses paid or incurred in a taxable year over a taxpayer's base amount of research expenses.
The Research Expenses Credit is applied against a taxpayer's income tax liabilities. Although no carryback or refund of unused credits are allowed, carryovers of unused credit amounts are allowed to 15 succeeding taxable years following the year in which the unused credit is generated. The termination date for qualified expenses is December 31, 2013.
Financial Institutions Tax
Taxpayer: All corporations transacting the business of a financial institution in Indiana, except for insurance companies, international banking facilities, S corporations and not-for-profit corporations (except state-chartered credit unions).
Tax Base: Federal adjusted gross income less a percentage apportioned to nonresident taxpayers and unitary groups with nonresident members.
Tax Rate: 8.5%
Major Deductions and Exemptions: Income derived from sources outside the U.S. An amount equal to debt or portion of a debt that becomes worthless. All bad debt reserves that is included in federal income because of accounting method changes required by the Internal Revenue Code.
Individual Adjusted Gross Income Tax
Taxpayer: Individuals, partners, stockholders in S corporations and nonresidents with income from sources in Indiana.
Tax Base: Federal adjusted gross income with additions of the amounts subtracted on federal returns for interest income, net operating losses derived from sources outside Indiana, state income taxes, local property taxes and recoveries of previously allowed deductions.
Tax Rate: 3.4%
Major Deductions and Exemptions: Income tax that is exempt under federal law or the Constitution. A $1,000 deduction for the taxpayer, spouse and each dependent claimed on taxpayer's federal return. An additional $1,500 exemption for dependent children under the age of 18. Rent up to $2,000. A $1,000 exemption for each individual age 65 and over and/or blind. A qualified employee working and living in an Enterprise Zone is entitled to a tax deduction equal to the lesser of 50% of earnings or $7,500. Net operating losses derived from sources outside of Indiana. Partial deduction of unemployment compensation costs. Property taxes paid for an individual's principal place of residence up to $2,500. Qualified long-term care insurance premiums.
Credits: Up to 3.4% of the income taxed by other states. 50% of contributions to Indiana colleges and universities up to $100 ($200 on a joint return). 50% of amounts used to assist impoverished areas or to employ or train poor persons (up to $25,000). Increased employment expenditures in an Enterprise Zone equal to the lesser of 10% of the increase in wages paid over the base year or $1,500 per qualified employee. Credit for donations of qualified computer equipment ($125 per unit). Elderly credit based on age, income levels and filing status, ranging from $40 to $140.
Sales and Use Tax
Taxpayer: Purchasers of tangible personal property and public utility service, renters of rooms or other accommodations for less than 30 days, and renters of other property.
Tax Base: Sales price of the taxable transaction.
Tax Rate: 6%
Major Deductions and Exemptions: Wholesale sales. Purchases of items used directly in the production process, including raw materials, machinery, tools and equipment directly used in direct production. Any sale of goods for resale. Sales made in interstate commerce. Power, electricity and gas if 51% of the load is used for manufacturing. Pollution-abatement equipment if required by federal, state or local law. Sales to governmental entities.
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