Indiana IT-40 Income Tax Instruction Booklet

IT-40 Income Tax Instruction Booklet
IT-40 Full Year Resident Individual Income Tax Booklet
INDIANA

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IT-40

Full-Year Resident

Individual Income Tax Booklet

freefile.dor.in.gov  FAST • FRIENDLY • FREE

WAIT!
YOU MAY QUALIFY FOR FREE ONLINE TAX FILING!

The majority of Indiana taxpayers file electronically every year. Consider the benefits of filing electronically:
•	

Faster Refund. Electronic filing reduces errors and expedites refund time – within 10 to 14 days
(compared with 10 to 12 weeks for a paper return).

•	

Fewer Errors. Up to 20 percent of paper-filed returns have errors, which can result in delays and possible
penalty and/or interest for the taxpayer. Returns filed electronically, however, are 98 percent accurate.

•	

Easier Filing. You won’t have to complete the many complicated forms in this booklet. Instead, you go online,
answer some easy questions, and before you know it your taxes are complete.

You may be eligible to file your taxes online for FREE with INfreefile. Go to www.in.gov/dor/individual-income-taxes/
infreefile to see if you qualify or learn more about INfreefile on page 4.

SP 265
(R24 / 12-23)

Which Indiana Tax Form Should You File?

Credits

Indiana has three different individual income tax returns. Read the
following to find the right one for you to file.

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Form IT-40 for Full-Year Residents

Use Form IT-40 if you (and your spouse, if married filing jointly) were
full-year Indiana residents.

•	

Form IT-40PNR for Part-Year and Full-Year
Nonresidents

Use Form IT-40PNR if you (and your spouse, if married filing jointly):
•	 Were Indiana residents for less than a full-year or not at all, or
•	 Are filing jointly and one was a full-year Indiana resident and the
other was not a full-year Indiana resident, and
•	 Do not qualify to file Form IT-40RNR.

Form IT-40RNR for Full-Year Residents of Reciprocal
States

Use Form IT-40RNR if you (and your spouse, if married filing jointly)
were:
•	 Full-year residents of Kentucky, Michigan, Ohio, Pennsylvania or
Wisconsin, and
•	 The only type of income from Indiana was from wage, tip, salary
or other compensation.*
*You are required to file Form IT-40PNR if you have any other kind of
Indiana-source income.

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Deductions
•	

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Note. If you have income that is being taxed by both Indiana and
another state, you may have to file a tax return with the other state.

Military Personnel

See the instructions on page 7 to determine which form to file.
Military personnel stationed in a combat zone should see the
instructions on page 7 for extension of time to file procedures.

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•	

2023 Changes
Update. 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 have to amend
your tax return at a later date to reflect any differences between Indiana
and federal law. You may wish to periodically check DOR’s homepage
at www.in.gov/dor for updates.

Add-backs
•	
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A new add-back (151) has been added for certain modifications
required to be applied against a net operating loss resulting from
an excess business loss. See page 14 for more information.
A new add-back (153) has been added for certain modifications
related to net operating losses permitted as a result of excess
inclusion income. See page 14 for more information.
A new add-back (154) is available for specified research and
experimental expenses required to be amortized for federal
income tax purposes. See page 15 for more information.

A new credit (874) is available for qualified investments at a mine
reclamation site. See page 42 for more information.
Indiana’s Earned Income Tax Credit (EITC) has recoupled with
the federal EITC. Indiana EITC is now 10% of federal EITC.
Taxpayers may now claim up to three qualified children on
Schedule IN-EIC. See page 31 for more information.
The Indiana’s CollegeChoice 529 Education Savings Plan Credit
maximum credit amount has increased. In addition, contributions
made after December 31, but no later than April 15, may claim a
credit on either the current tax year or previous tax year returns.
See page 39 for more information.
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. See page 37 for further information.
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. See page 30 for more information.
A new deduction (639) is available to allow the deduction for
the portion of small employer health insurance premiums that is
disallowed for federal purposes as a result of claiming the credit
under IRC section 45R. See page 23 for more information.
A new deduction (641) is available to permit a current-year
deduction for specified research and experimental expenses
otherwise required to be amortized for federal tax purposes. See
page 23 for more information.
A new deduction (642) is available for Career Scholarship
Account (CSA) program grants received and used toward
qualified expenses. See page 19 for more information.
The 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. See page 22 for more information.

Exemptions
•	

Additional Dependent Child Exemption Change. If a taxpayer
is claiming a child as a 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. See
page 26 for more information.

Miscellaneous
•	
•	

The Individual Income Tax Rate is lowered to 3.15% for tax year
2023.
Direct Debit of Estimated Payment. DOR will now accept direct
debit of estimated payments with the electronic filing of your
current year tax return.

IT-40 Booklet 2023

Page 3

Need Tax Forms or Information Bulletins?
Use Your Personal Computer

Internet Address

If you need help deciding which form to file, or need to get information
bulletins or policy directives on specific topics, visit our website at www.
in.gov/dor.

Visit our website and download the forms you need. Our address for
tax forms is www.in.gov/dor/tax-forms. Information Bulletins are
available at www.in.gov/dor/legal-resources/tax-library.

Ready to File Your Return?

Visit a District Office

Use an Electronic Filing Program

Some tax forms are available at district offices located throughout the
state. These offices are open Monday - Friday, 8 a.m. to 4:30 p.m. local
time. Visit www.in.gov/dor/contact-us/district-office-contact-info for
a list of these offices, including addresses and telephone numbers.

Need Help With Your Return?
INTIME e-Services Portal Available

INTIME, DOR’s e-services tax portal available at intime.dor.in.gov,
provides the following functionalities for Individual customers:
•	 Make payments using a bank account or credit card
•	 View and respond to correspondence from DOR
•	 Request and print return transcripts on-demand
•	 Electronic delivery of correspondence
•	 Online customer service support through secure messaging

Increased Online Support for Tax Preparers

In addition to the functionality listed above, INTIME provides
increased access and functionality for tax preparers. INTIME provides
the following functionality for tax preparers:
•	 Gain access to view and manage multiple customers under one
login
•	 Ability to file returns, make payments, and view file and pay
history for clients
•	 Request electronic power of attorney (ePOA) authorization to
view customer accounts
•	 View and respond to correspondence for clients
We strongly encourage all taxpayers to make payments and file returns
electronically whenever possible. INTIME allows customers to make
estimated payments electronically with just a few clicks.

Local Help

You may be eligible to take advantage of the IRS Volunteer Return
Preparation Program (VRPP). This program offers free tax return
help to low income, elderly and special needs individuals. Volunteers
will fill out federal and state forms for those who qualify. Call the IRS
at 1-800-829-1040 to find the nearest VRPP location. Be sure to take
your W-2s, 1099s and a copy of last year’s state and federal tax returns.

Information Line

Call the information line at 317-232-2240 to get the status of your
refund, billing and payment plan information, a copy of your tax
return, or prerecorded tax topics. If you wish to check for billing
information, be sure to have a copy of your tax notice. The system will
ask you to enter the tax identification number shown on the notice. To
speak to a representative, please call during regular business hours, 8
a.m. to 4:30 p.m., Monday - Friday.
Page 4

IT-40 Booklet 2023

A majority of Hoosier taxpayers use an electronic filing program to
file their state and federal individual income tax returns every year.
Electronic filing provides Indiana taxpayers the opportunity to file their
federal and state tax returns immediately, and receive their Indiana
refunds in about half the time it takes to process a paper return. It takes
even less time if you use direct deposit, which deposits your refund
directly into your bank account. Even if there is an amount due on
either return, Indiana taxpayers can still file electronically and feel
comfortable knowing that the returns were received by the IRS and the
Indiana Department of Revenue (DOR). Use an electronic vendor or
contact your tax preparer to see if he or she provides this service.

INfreefile

This tax season Indiana continues to offer a free tax filing service
through the cooperation of the Free File Alliance. Eligible Indiana
taxpayers can file both the federal and Indiana individual tax returns
using highly interactive and easy-to-use web-based applications that
speed both returns and refunds. You can choose from a list of multiple
vendors that provide this free service. DOR estimates nearly 2 million
Indiana taxpayers are eligible for this free service. See if you are
eligible by visiting www.in.gov/dor/individual-income-taxes/infreefile.

Our Website

Our website offers tax filing options, a Spanish version of the IT-40
booklet with forms, downloadable blank forms and instructions,
information bulletins, an online helpdesk, helpful email links and a
calendar with filing due dates. Visit DOR’s website at www.in.gov/dor.

Moving?

Notify DOR if you move to a new address after filing your tax return,
Change your address with us by doing one of the following:
•	 Use DOR’s e-services portal, the Indiana Taxpayer Information
Management Engine (INTIME), to change your address at intime.
dor.in.gov. INTIME offers customers the ability to manage their
tax account(s) in one convenient location, 24/7.
You can change your address by creating an INTIME log on. Once
logged in, go to the “All Actions” tab and locate the “Update Name
and Addresses” panel and select the “Addresses” tab.
An INTIME User Guide for Individual Income Tax Customers is
available at www.in.gov/dor/files/intime-individual-guide.pdf to
help you through the process.
•	 Fax your request, including your Social Security number, old
address, new address and signature, to 317-615-2608.
•	 Mail the request, including your Social Security number, old
address, new address and signature, to Indiana Department of
Revenue, P.O. Box 6197, Indianapolis, IN 46206-6197.
•	 Visit one of our District Offices (find locations here: www.in.gov/dor/
contact-us/district-office-contact-info) in person. Make sure to bring
your Social Security number, old address, and new address with you.

Filing an Amended (Corrected) Tax Return

If you need to amend (correct) your 2023 individual income tax return
after you initially filed:
•	 Prepare another IT-40 return that reflects all changes and check
the “Amended” box on the front page. Failure to do so can delay
processing.
•	 Imclude a copy of all required schedules reflecting all changes and
documentation. Failure to do so can delay processing.
•	 File the amended return electronically, if possible.
Note. All amounts previously paid should be reported as an estimated
payment. All refunds previously received should not be reported on an
amended filing.
If you are filing an amended return for 2023 reporting additional tax
and you previously received a refund, the department will issue either
a notice of proposed assessment or demand for payment to request
repayment of the refund plus interest and penalty.

to get an ITIN, contact the IRS at 1-800-829-3676 and request federal
Form W-7, or find it online at www.irs.gov.

Name and Suffix

Please use all capital letters when entering your information. For
example, Jim Smith Junior should be entered as JIM SMITH JR.
Name. If your last name includes an apostrophe, do not use it. For
example, enter O’Shea as OSHEA. If your name includes a hyphen, use
it. For example, enter SMITH-JONES.
Suffix. Enter the suffix associated with your name in the appropriate box.
•	 Use JR for junior and SR for senior.
•	 Numeric characters must be replaced by alphabetic Roman
Numerals. For example, if your last name is Charles 3rd, do not
use 3rd; instead, enter III in the suffix field.
•	 Do not enter any titles or designations, such as M.D., Ph. D., RET.,
Minor or DEC’D.

The Form IT-40 and supporting schedules are located at www.in.gov/
dor/tax-forms/2023-individual-income-tax-forms. For prior years,
please see the instructions for that year.

Married Filing Requirements

Annual Public Hearing

•	

In accordance with the Indiana Taxpayer Bill of Rights, DOR will
conduct an annual public hearing in Indianapolis in June 2024. Event
details will be listed at www.in.gov/dor/news-media-and-publications/
dor-public-events/annual-public-hearings. Please come and share
feedback or comments about how DOR can better administer Indiana
tax laws. If not able to attend, please submit feedback or comments in
writing to: Indiana Department of Revenue, Commissioner’s Office,
MS# 101, 100 N. Senate Avenue, Indianapolis, IN 46204. Our homepage
provides access to forms, information bulletins and directives, tax
publications, email, and various filing options. Visit www.in.gov/dor.

Before You Begin
Important. You must complete your federal tax return first.

Filling in the Boxes – Please Use Ink

If you are filling out the form by hand, please use black or blue ink and
print your letters and numbers neatly within each box. If you do not
have an entry for a particular line, leave it blank. Do not use dashes,
zeros or other symbols to indicate that you have no entry for that line.

Social Security Number

Be sure to enter your full 9-digit Social Security number in the boxes
at the top of the form. If filing a joint return, enter your Social Security
number in the first set of boxes and your spouse’s full 9-digit Social
Security number in the second set of boxes. An incorrect or missing
Social Security number can increase your tax due, reduce your refund,
or delay timely processing of your filing.

Individual Taxpayer Identification Number (ITIN)

If you already have an ITIN, enter it wherever your Social Security
number is requested on your tax return. If you are in the process of
applying for an ITIN, check the box located directly beneath the Social
Security number area at the top of the form. For information on how

•	

•	

Married Filing Jointly
If you filed your federal income tax return as married filing
jointly, you also must file married filing jointly with Indiana.
Married Filing Separately
If you file your federal income tax return as married filing separately,
you must also file as married filing separately with Indiana. Enter
both of your Social Security numbers in the boxes on the top of the
form, and then check the box directly to the right of those boxes.
Enter the name of the person filing the return on the top line, but
do not enter the spouse’s name on the second name line.
Married Persons Who Live Apart Filing Status
If you were not divorced or legally separated during the tax year
you may have qualified for and filed as ‘head of household’ on
your federal income tax return. If you did, do not check the
married filing separately box. Also, do not enter either your
spouse’s name or Social Security number.

Military Address

Overseas military addresses must contain the APO, FPO designation
in the “city field” along with a two-character “state” abbreviation of
AE, AP, or AA and the ZIP code. Place these two- and three-letter
designations in the city name area.

ZIP/Postal Code

Enter your five- or nine-digit ZIP code (do not use a dash). For
example, enter 46217 or 462174540. If filing with a foreign address,
enter the associated postal code.

Foreign Country Code

Complete this area if the address you are using is located in a foreign
country. Enter the 2-character foreign country code, which may be
found online at www.in.gov/dor/legal-resources/tax-library/foreigncountry-code-listing.

County Information

Enter the two-digit code numbers for the county(s) where you and
your spouse, if filing jointly, lived and worked on Jan. 1, 2023. You
can find these code numbers on the chart found on the back of
Schedule CT-40. See the instructions beginning on page 49 for
IT-40 Booklet 2023

Page 5

more information, including the definitions of the county where
you live and work, details for military personnel, retired individuals,
homemakers, unemployed individuals, out-of-state filers, etc.

Refund Check Address

Your refund check will be issued in the name(s), address and Social
Security number(s) shown on your tax return. It is very important that
this information is correct and legible. Any wrong information will
delay your refund.

Rounding Required

Each line on which an amount can be entered has “.00” already filled
in. This is to let you know that rounding is required when completing
your tax return.
You must round your amounts to the nearest whole dollar.
To do this, drop amounts of less than $0.50.
Example. $432.49 rounds down to $432.00.
Increase amounts of $0.50 or more to the next higher dollar.
Example. $432.50 rounds up to $433.00.

Losses or Negative Entries

When reporting a loss or negative entry, use a negative sign.
Example. Write a $125 loss as -125.

Commas

Do not use commas when entering amounts. For instance, express
1,000 as 1000.

Enclosing Schedules, W-2s, Etc.

Use only DOR-issued or DOR-permitted forms and schedules. Failure
to use correct forms and schedules could result in disallowance of
deductions or credits and will delay processing your return. You will
find an enclosure sequence number in the upper right-hand corner
of each schedule. Make sure to put your completed schedules in
sequential order behind the IT-40 when assembling your tax return.
Do not staple or paper clip your enclosures. If you have a schedule
on which you’ve made no entry, do not enclose it unless you have
completed information on the back of it.
Also, enclose:
•	 All W-2s, 1099s, Forms IN-MSID-A and IN K-1s on which
Indiana state and/or county tax withholding amounts appear
•	 All IN K-1s on which pass through entity tax amounts appear
•	 All 1099Gs showing unemployment compensation
•	 A check/money order, if applicable
A note about your W-2s. It is important that your W-2 form is
readable. The income and state and county tax amounts withheld are
verified on every W-2 form that comes in with your tax return. We
encourage you to enclose the best copy available when you file.

Who Should File?

You may need to file an Indiana income tax return if:
•	 You lived in Indiana and received income, or
•	 You lived outside Indiana and had any income from Indiana.
Filing Status Requirement. If you and your spouse file a joint federal
tax return, you must file a joint tax return with Indiana. If you and
your spouse file separate federal tax returns, you must file separate tax
returns with Indiana.
Note. There are three types of Indiana tax returns available. The type
you need to file is generally based on your residency status. Read the
following to decide if you are a full-year resident, part-year resident, or
nonresident of Indiana, and which type of return you should file.

Full-Year Residents

If you were a full-year resident of Indiana and your gross income
(the total of all your income before deductions) was greater than
certain exemptions*, you must file an Indiana tax return.
Full-year residents must file Form IT-40, Indiana Full-Year Resident
Individual Income Tax.
You are a full-year Indiana resident if you maintain your legal
residence in Indiana from Jan. 1 – Dec. 31 of the tax year. You
do not have to be physically present in Indiana the entire year to
be considered a full-year resident. Residents, including military
personnel, who leave Indiana for a temporary stay, are considered
residents during their absence.
Retired persons spending part of the year in another state may still be
full-year residents if:
•	 They maintain their legal residence in Indiana and intend to
return to Indiana during part of the taxable year
•	 They retain their Indiana driver’s license
•	 They retain their Indiana voting rights
•	 They claim a homestead deduction on their Indiana home for
property tax purposes
* To figure your exemptions for filing requirement purposes, Indiana
allows a $1,000 exemption for you and a $1,000 exemption for your
spouse (if married filing jointly). You also get a $1,000 exemption
for each dependent you are eligible to claim. See instructions
beginning on page 24 for additional information concerning how
to figure your dependents. If your gross income is less than your total
exemptions figured above, you are not required to file. However, you
may want to file a return to get a refund of any state and/or county
tax withheld by your employer, or other refundable credits, such as an
earned income credit or estimated tax payment.

Part-Year Residents and Full-Year Nonresidents

If you were a part-year resident and received income while you lived
in Indiana, you must file Indiana Form IT-40PNR, Part-Year Resident
or Nonresident Individual Income Tax Return.
If you were a legal resident of another state(s) (exception: see next
paragraph) and had income from Indiana (except certain interest,
dividends, or retirement income), you must file Form IT-40PNR.

Page 6

IT-40 Booklet 2023

Full-Year Residents of Kentucky, Michigan, Ohio,
Pennsylvania or Wisconsin

If you were a full-year resident of Kentucky, Michigan, Ohio,
Pennsylvania or Wisconsin, and your only income from Indiana was
from wages, salaries, tips or commissions, then you need to file Form
IT-40RNR, Indiana Reciprocal Nonresident Individual Income Tax
Return.

Deceased Taxpayers

If an individual died during 2023, or died after Dec. 31, 2023, but
before filing his/her tax return, the executor, administrator or
surviving spouse must file a tax return for the individual if:
•	 The deceased was under the age of 65 and had gross income more
than $1,000
•	 The deceased was age 65 or older and had gross income more
than $2,000, or
•	 The deceased was a nonresident and had gross income from Indiana.
Be sure to enter the month and day of death for the taxpayer or spouse
in the appropriate box located on Schedule 7. For example, a date of
death of Jan. 9, 2023, would be entered as 01/09/2023.
Note. The date of death should not be entered here if the individual
died after Dec. 31, 2023, but before filing the tax return. The date of
death information will be shown on the individual’s 2024 tax return.

Signing the Deceased Individual’s Tax Return

If a joint return is filed by the surviving spouse, the surviving spouse
should sign his or her own name and after the signature write: “Filing
as Surviving Spouse.”
An executor or administrator appointed to the deceased’s estate must
file and sign the return (even if this isn’t the final return), indicating
their relationship after their signature (e.g. administrator).
If there is no executor, or if an administrator has not been appointed,
the person filing the return should sign and give their relationship to
the deceased (e.g. “John Doe, nephew”). Only one tax return should be
filed on behalf of the deceased.
Note. DOR may ask for a copy of the death certificate, so please keep a
copy with your records.

Refund Check for a Deceased Individual

If you (the surviving spouse, administrator, executor or other)
have received a refund check and cannot cash it, contact the State
Comptroller at www.in.gov/comptroller/contact-us to get a widow’s
and distributee’s affidavit (POA-20) or a reissuance of refund (IN1310). Send the completed form, the refund check and a copy of the
death certificate to the State Comptroller so a refund check can be
issued to you.

Military Personnel — Residency

If you were an Indiana resident when you enlisted, you remain an
Indiana resident no matter where you are stationed. You must report
all your income to Indiana on Form IT-40.
If you changed your legal residence (military home of record) during the
tax year, you are a part-year resident and should file Form IT-40PNR.

You must also enclose a copy of Military Form DD-2058 with the tax
return. As an Indiana part-year resident you will be taxed on the income
you earned while you were a resident of Indiana, plus any income from
Indiana sources.
If you are stationed in Indiana and you are a resident of another state,
you won’t need to file with Indiana unless you have non-military
income from Indiana sources.
Example. Annie, who is a Kansas resident, is stationed in Indiana. She
earned $1,300 from her Indiana part-time job. She will need to report
that income to Indiana on Form IT-40PNR.
If you are a full-year Indiana resident in the military, your spouse is a
legal resident of another state and you filed a joint federal return, you
will need to file Form IT-40PNR.
Important. Refer to the instructions on page 49 for an explanation
of county of residence for military personnel.

When Should You File?

Your tax return is due April 15, 2024. If you file after this date and owe
tax, you will owe interest on the unpaid amount and you may owe
penalty, too. See page 11 for more information.
Fiscal year tax returns are due by the fifteenth (15) day of the fourth
(4th) month after the close of the fiscal year. You must complete the
fiscal year filing period information at the top of the Form IT-40.

Extension of Time to File — What if You Can’t File on
Time?
You must get an extension of time to file if you:
•	 Are required to file, and
•	 You cannot file your tax return by the April 15, 2024, due date.
Whether you owe additional tax, are due a refund, or are breaking
even, you still need to get an extension if filing after April 15, 2024.
Note. Indiana’s Application for Extension of Time to File, Form IT-9,
extends the filing date to Nov. 15, 2024.
If You Owe…
Option 1. File Indiana’s Application for Extension of Time to File,
Form IT-9. This must be filed by April 15, 2024, for the extension
request to be valid.
Note. You may file Indiana’s Application for Extension of Time to
File online if you make a payment with it by April 15, 2024. Pay
electronically using DOR’s e-services portal, the Indiana Taxpayer
Information Management Engine (INTIME), by visiting intime.dor.
in.gov. INTIME offers customers the ability to manage their accounts
in one convenient location, 24/7.
Option 2. Filing for a federal application for extension of time to file
with the IRS will automatically provide for a state extension of time to
file. You must file your state tax return by Nov. 15, 2024, paying any
balance due with that filing.
IT-40 Booklet 2023

Page 7

While interest is due on any amount paid after the original April 15 due
date, penalty will be waived if both of the following conditions are met:
•	 The remaining balance due is paid in full by Nov. 15, 2024, and
•	 You paid at least 90% of the tax expected to be owed by the
original April 15 due date.
If You Don’t Owe…
You’ll need to file for an extension if:
•	 You are due a refund, or
•	 You don’t expect to owe any tax when filing your tax return, and
•	 You are unable to file your return by April 15, 2024.
There are two ways to accomplish this:
•	 If you have a federal extension (you filed Form 4868, or made
an extension payment via an electronic filing method), you
automatically have an extension with Indiana and do not have to
file for a separate state extension (Form IT-9).
•	 If you do not have a federal extension, file Form IT-9 by April 15, 2024.
Extension Filing Deadline
Both state Form IT-9 and federal Form 4868 extend your state filing
time to Nov. 15, 2024.
Will You Owe Penalty and/or Interest?
Penalty will not be owed if you have:
•	 Paid 90% of the tax you expect to owe by April 15, 2024,
•	 Filed your tax return by Nov. 15, 2024, and
•	 Paid any remaining amount due (including interest) with that filing.
Interest is owed on all amounts paid after April 15, 2024. See page
11 for instructions on how to figure interest.
Indiana’s Extension of Time to File, Form IT-9
Pay electronically using DOR’s e-services portal, the Indiana Taxpayer
Information Management Engine (INTIME), by visiting intime.dor.
in.gov. INTIME offers customers the ability to manage their accounts
in one convenient location, 24/7. Alternatively, you may access Form
IT-9 online at www.in.gov/dor/tax-forms/2023-individual-incometax-forms. You may file Indiana’s Application for Extension of Time to
File online if you make a payment with it by April 15, 2024.

Form IT-40: Line-by-line Instructions
Important. You must complete your federal income tax return, Form
1040/1040-SR, before starting your Indiana income tax return. Line
numbers from your federal income tax return are referenced in many
of the following instructions. While every effort has been made to
make the instructions as clear as possible, sometimes the line numbers
change on the federal income tax return after the Indiana forms are
finalized. Please contact us if you are unsure as to whether or not you
are looking at the correct line on your federal income tax return (see
page 4 of this booklet for contact information).

When Not to Fill In a Line

If you do not have an entry for a particular line, leave it blank. Do not
use dashes, zeros or other symbols to indicate that you have no entry
for that line.

Line 1 – Federal Adjusted Gross Income

Enter the adjusted gross income from your federal Form 1040/1040SR, line 11. If you were not required to file a federal return, complete a
“sample” federal return and report the amount you would have shown
on your federal return if you had been required to file.
When reporting a loss or negative entry, use a negative sign.
Example. Write a $125 loss as -125.

Line 2 – Add-Backs

Enter on this line any add-backs from Schedule 1: Add-Backs.
Instructions for Schedule 1 begin on page 12. Make sure to enclose
Schedule 1 when filing.

Line 4 – Deductions

Enter on this line any deductions from Schedule 2: Deductions.
Instructions for Schedule 2 begin on page 16. Make sure to enclose
Schedule 2 when filing.

Line 6 – Exemptions

Enter any exemptions from Schedule 3: Exemptions on this line.
Instructions for Schedule 3 begin on page 24. Make sure to enclose
Schedule 3 when filing.

Where to Report Your Extension Payment
Add your state extension payment to any estimated tax paid. Report
the total on Schedule 5, line 4.

Line 9 – County Tax

Military personnel on duty outside of the United States and Puerto
Rico on the filing due date are allowed an automatic 60 day extension of
time to file. A statement must be enclosed with the return verifying that
you were outside of the United States or Puerto Rico on April 15, 2024.

Line 10 – Other Taxes

Military personnel in a presidentially declared combat zone have an
automatic extension of 180 days after they leave the combat zone. In
addition, if they are hospitalized outside the United States because of
such service, the 180-day extension period begins after being released
from the hospital. The spouse of such service member must use the
same method of filing for both federal and Indiana (e.g. single or
joint). When filing the return, write “Combat Zone” across the top of
the form (above your Social Security number).

Line 12 – Credits

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IT-40 Booklet 2023

Complete Schedule CT-40 to figure your county tax. Instructions for
Schedule CT-40 begin on page 49.
Enter any other taxes from Schedule 4: Other Taxes on this line.
Instructions for Schedule 4 begin on page 28. Make sure to enclose
Schedule 4 when filing.
Enter your credits from Schedule 5: Credits on this line. Instructions
for Schedule 5 begin on page 29. Make sure to enclose Schedule 5
when filing.

Line 13 – Offset Credits

Enter the total of any offset credits reported on Schedule 6: Offset
Credits on this line. Instructions for Schedule 6 begin on page 36.

Make sure to enclose Schedule 6 when filing.

Line 17 – Donation Check-Offs

Enter on this line the total of any donations made on Schedule INDONATE. Make sure to enclose Schedule IN-DONATE, which is
located at the bottom of Schedule 5: Credits, when filing. See page
35 for more information.

Line 19 – Amount to be Applied as a 2024 Estimated
Tax Installment Payment

You should pay estimated tax during the 2024 tax year if:
•	 You have income that will not be subject to Indiana tax
withholding, or
•	 You think the amount withheld will not be enough to pay your tax
liability, and
•	 You expect to owe more than $1,000 when you file your tax return.
The simplest and most efficient way to pay quarterly estimated taxes
is by using INTIME at intime.dor.in.gov. INTIME offers a quick, safe
and secure way to submit estimated payments, while providing the
option to schedule payments and view payment history. By using
this method, customers receive a confirmation number immediately
without having to wait for mail to arrive or checks to clear.
INTIME also provides the option to schedule all four estimated
payments, up to a year in advance, to avoid penalties and never miss
a deadline again. Any awaiting payment(s) in INTIME will remain
“pending” until the scheduled payment date enabling customers to
make changes or cancel at any time leading up to that date.
Instructions on how to make estimated payments using INTIME
are available in the INTIME User Guide for Individual Income Tax
Customers at www.in.gov/dor/files/intime-individual-guide.pdf.
Beginning in 2024, if you file your individual return electronically,
DOR will accept direct debit of up to four estimated payments.
Alternatively, you may visit our website at www.in.gov/dor/taxforms/2023-individual-income-tax-forms to get Form ES-40. Use the
worksheet on Form ES-40 to see how much you will owe. Then, if you
have an overpayment showing on line 18 of your tax return, you can
have some or all of the overpayment applied to next year’s estimated
tax account. To do so, enter any portion of the overpayment:
•	 On line a, if you want to apply an amount to offset estimated
county tax due (from Form ES-40 worksheet, line K). Also, enter
the 2-digit county code from line K; and/or
•	 On line b, if your spouse lived in a different county than you did
on Jan. 1, 2024, and you want to apply an amount to offset your
spouse’s estimated county tax due (from Form ES-40 worksheet,
line L). Also, enter the 2-digit county code from line L; and/or
•	 On line c, if you want to apply an amount to offset your estimated
state tax due (from Form ES-40 worksheet, line J).
Example. Mark and Megan have a $420 overpayment, and want to
apply $300 of it to their 2024 estimated tax account. Their worksheet
from Form ES-40 has the following breakdown:
•	 Line I (each installment payment) is $300;
•	 Line J (portion that represents state tax due) is $270; and
•	 Line K (portion that represents county tax due) is $30.

They will enter $30 on line 19a (along with their 2-digit county code),
$270 on line 19c, and the $300 total amount to be applied will be
entered on line 19d. They will get a $120 refund ($420 overpayment
minus $300 applied to their 2024 estimated tax account).
Example. Stu wants to pay $500 in estimated tax for each installment
period. He has a $30 overpayment on his tax return. He chooses to
enter the full $30 overpayment on line 19c (Indiana adjusted gross
income tax amount), and carries it to line 19d. (He may pay the $470
additional amount by using INTIME to make a secure electronic
payment, or by printing Form ES-40 and filing it along with a check or
money order.)
Important. Estimated tax installment payments made for the 2024 tax
year are due by:
•	 April 15, 2024 (1st installment)
•	 June 17, 2024 (2nd installment)
•	 Sept. 16, 2024 (3rd installment)
•	 Jan. 15, 2025 (4th installment)
Any installment payment amount entered on line 19d will be
considered to be paid on the day your tax return is filed (postmarked).
For instance, an installment payment shown on a return filed on: April
15, 2024, will be considered to be a 2024 first installment payment;
June 3, 2024, will be considered to be a 2024 second installment
payment; and July 22, 2024, will be considered to be a 2024 third
installment payment.
Note. You may complete and mail the ES-40, Estimated Tax Payment
form, along with your payment to DOR’s return address on the form.
Estimated payments can also be made online with an electronic bank
payment (ACH/e-check) or Visa, MasterCard and Discover debit or
credit cards by using DOR’s e-services portal, the Indiana Taxpayer
Information Management Engine (INTIME), at intime.dor.in.gov. See
line 26 instructions on page 11 for details about payment options.
See Income Tax Information Bulletin #3 at www.in.gov/dor/files/
reference/ib03.pdf for additional information about estimated taxes.

Line 20 – Penalty for Underpayment of Estimated Tax

You might owe a penalty for the underpayment of estimated tax if you
did not have taxes withheld from your income and/or you did not pay
enough estimated tax throughout the year.
In fact, not properly paying estimated tax is one of the most common
errors made in filing Indiana tax returns. Generally, if you owe $1,000
or more in state and county tax for the year that’s not covered by
withholding taxes, you need to be making estimated tax payments.
You might owe this penalty if:
•	 The total of your credits, including timely made estimated tax
payments, is less than 90% of this year’s tax due or 100% of last
year’s tax due, ** or
•	 You underpaid the minimum amount due for one or more of the
installment periods.
If either of these cases apply to you, you must complete Schedule
IT-2210 or IT-2210A to see if you owe a penalty or if you meet an
exception.
IT-40 Booklet 2023

Page 9

•	
•	

If you owe this penalty, complete Schedule IT-2210 or IT-2210A
and write the penalty amount on Form IT-40, line 20.
If you meet an exception, complete Schedule IT-2210 or IT-2210A
to show which exception was met.

Include the completed form with your submission.
*You must have timely paid 100% of lines 8 and 9 of your 2022 IT-40
or IT-40PNR. Note: If last year’s Federal adjusted gross income was
more than $150,000 ($75,000 for married filing separately), you must
pay 110% of last year’s tax (instead of 100%) to meet this exception.
**Farmers and fishermen should see the special instructions on page 10.
Important. DOR will compute and assess the underpayment penalty
where appropriate based on filing history and tax due.

Should You Use Schedule IT-2210 or Schedule IT-2210A?
Schedule IT-2210 should be used by individuals who receive income
(not subject to withholding tax) on a fairly even basis throughout the
year. This schedule will help determine whether a penalty is due, or
whether an exception to the penalty has been met.

Example. Jim and Sarah together received $4,500 in pension income
each month. Since their income is received on a fairly even basis, they’ll
use Schedule IT-2210 to figure their penalty or exception to the penalty.
Farmers and fishermen have special filing considerations. If at least
two-thirds of your gross income is from farming or fishing, complete
Schedule IT-2210, using the Section D Short Method.
Schedule IT-2210A may be used by individuals who receive income
(not subject to withholding tax) unevenly during the year. Also use
this form if you had substantial changes in withholding during the
year. See Income Tax Information Bulletin #3 available at www.in.gov/
dor/files/reference/ib03.pdf for further information. This schedule will
help determine whether a penalty is due, or whether an exception to
the penalty has been met.
Example. Bill’s income is from selling fireworks in June and July. He
will want to figure any penalty due on Schedule IT-2210A, which may
exempt him from having had to pay estimated tax on the April 15,
2023, first installment due date.
Example. Rachael received a sizable lump sum distribution in
December of 2023. She figured how much estimated tax was due, and
paid it in full by the Jan. 16, 2024, fourth period installment due date.
By completing Schedule IT-2210A, she shows she owes no penalty
for the first three installment periods, and that a proper payment was
made for the fourth installment period. She will owe no penalty.
Farmers and Fishermen.
Special options are available if more than two-thirds of your gross
income for 2022 and/or 2023 was from farming or fishing.
Option 1. Pay your estimated tax in one payment on or before Jan. 16,
2024, and file your tax return by April 15, 2024; or
Option 2. Make no estimated tax payment and file your tax return and
pay all the tax due by March 1, 2024.
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IT-40 Booklet 2023

Example. More than two-thirds of Henry’s gross income is from
farming. He should complete Schedule IT-2210. Henry will be able
to use the Section D Short Method to figure his penalty or to show he
meets an exception to owing a penalty.
Example. Henry had two-thirds of his income for 2021 from farming.
In 2022 and 2023, Henry had less than two-thirds of his income from
farming or fishing. Henry can use the special option for farmers or
fisherman for 2022 because two-thirds of his previous-year income
(2021) was from farming or fishing. Henry cannot use the special
option for 2023 because less than two-thirds of his income for both
2022 and 2023 was from farming or fishing.
Visit our website at www.in.gov/dor/tax-forms/2023-individualincome-tax-forms to get Schedule IT-2210 or Schedule IT-2210A.

Line 20a

Enter Code A if you are computing your penalty using Form IT-2210A.
Enter Code F if you are reporting estimated tax as a farmer or a fisherman.

Line 21 – Refund

You have a refund if line 18 is greater than the combined amounts
entered on lines 19d and 20.
Important. If the combination of line 19d plus line 20 is greater than
the amount on line 18, you must make an adjustment. The estimated
tax carryover amount on line 19d is limited; it cannot be greater than
the remainder of line 18 minus line 20. See the second example about
Stu under the Line 19 instructions on page 9.

A Note About Refund Offsets

Indiana law requires that money you owe to the state, its agencies,
and certain federal agencies, be deducted from your refund or credit
before a refund is issued. This includes money owed for past-due
taxes, student loans, child support, food stamps or an IRS levy. If
DOR applies your refund to any of these debts, you will receive a letter
explaining the situation.

When to Expect Your Refund

Generally, 10 to 14 business days is the average wait for a refund if
the tax return is electronically filed; it can take up to 12 weeks for the
refund to be issued if you mail a paper tax return.
A refund may take longer under certain circumstances. The most
common incidents are when businesses supply withholding statements
(such as W-2, 1099-R, Schedule IN K-1, etc.) late and when the return
reports a Schedule C loss.

Where’s Your Refund?

There are several ways to check the status of your refund. You will
need to know the exact amount of your refund, and a Social Security
number entered on your tax return. Then, do one of the following:
•	 Go to www.in.gov/dor/individual-income-taxes/check-the-statusof-your-refund and click Check the Status of Your Refund.
•	 Call 317-232-2240 for automated refund information; to speak to
a representative, please call during regular business hours, 8 a.m.
to 4:30 p.m., Monday - Friday.
•	 Go to INTIME at intime.dor.in.gov and click “Where’s my refund?”

A refund directly deposited to your bank account may be listed on
your bank statement as a credit, deposit, etc. If you have received
information from DOR that your refund has been issued, and you are
not sure if it has been deposited in your bank account, call the ACH
Section of your bank or financial institution for clarification.
Important. If we are unable to deposit your refund to the listed
account (incorrect/incomplete account numbers; account closed;
refund to go to an account outside the United States; etc.), DOR will
mail a paper check to the address on the front of the tax form.
Note. A refund deposited directly to your Hoosier Works MasterCard
account will appear on your monthly statement.

Statute of Limitations for Refund Claims

There is a statute of limitations when filing for a refund of overpaid
taxes for tax year 2023. In general, a claim for refund must be made
by April 15, 2027 (Nov. 15, 2027 if filing under extension). The claim
for refund is considered to be made on the day your tax return
is postmarked. If you file your 2023 tax return after the statute of
limitations has expired, no refund will be issued.

Line 22 – Direct Deposit

You may choose to have your refund deposited in your checking, savings
or Hoosier Works Master Card account. If you want your refund directed
into your checking or savings account, complete lines 22 a, b, c and d.
Caution. If you choose this option, make sure to verify the account
information after you have entered it. This will help ensure your
refund is deposited into your desired account.
The routing number is nine digits, with the first two digits of the
number beginning with 01 through 12 or 21 through 32. Do not use a
deposit slip to verify the number because it may have internal codes as
part of the actual routing number.
The account number can be up to 17 digits. Omit any hyphens, accents
and special symbols. Enter the number from left to right and leave any
unused boxes blank.
Check the appropriate box for the type of account you are making
your deposit to: either a checking account or savings account.
To comply with banking rules, you must place an X in the box on line
d if your refund is going to an account outside the United States. If you
check the box, we will mail you a paper check.
If you currently have a Hoosier Works MasterCard and wish to have
your refund directly deposited in your account, enter your 12-digit
account number on line 22b, where it says “Account Number” (do
not write anything on line 22a “Routing Number”). You can find
your 12-digit account number in the upper right-hand corner of your
account monthly statement.
Note. DO NOT use your MasterCard 16-digit number. Make sure to
check the “Hoosier Works MC” box on line 22c.
For more information on direct deposit, please see “Where’s Your
Refund?” on page 10.

Line 23

If line 21 is less than zero, you have an amount due. Enter here as a
positive number and skip to line 24.
OR
If line 15 is greater than line 14, complete the following steps:
Subtract line 14 from line 15 and enter the total here... A___________
Enter any amount from line 20..........................................B___________
Add lines A + B. Enter total here and on line 23.............C___________

Line 24 – Penalty

You may owe a penalty if your tax return is filed after the April 15,
2024, due date and you have an amount due. Penalty is 10% of the
amount due (line 23 minus line 20) or $5, whichever is greater.
Exception. No penalty will be due if you have:
•	 An extension of time to file,
•	 Are filing and paying the remaining tax due by the extended filing
due date, and
•	 Have prepaid at least 90% of the amount due by April 15, 2024.

Line 25 – Interest

You will owe interest (even if you have an extension of time to file) if
your tax return is filed after the April 15, 2024, due date and you have
an amount due. Interest should be figured on the sum of line 23 minus
line 20. Contact DOR at 317-232-2240 or visit our website at www.
in.gov/dor/files/reference/dn03.pdf to get Departmental Notice #3 for
the current interest rate.

Line 26 – Amount Due – Payment Options
There are several ways to pay the amount you owe.

Electronic payments can be made via DOR’s e-service portal, the Indiana
Taxpayer Information Management Engine (INTIME), at intime.dor.
in.gov. INTIME offers customers the ability to manage their accounts in
one convenient location, 24/7. Accepted forms of payment via INTIME
include electronic bank payment (ACH/e-check), Visa, MasterCard
and Discover debit or credit cards. No fees are assessed for electronic
bank payments. Fees apply to payments made with credit or debit cards.
You do not need to logon to INTIME to make payments. Simply select
the “Make a Payment” option on the page. An INTIME User Guide for
Individual Income Tax Customers is available at www.in.gov/dor/files/
intime-individual-guide.pdf to help you through the process.
Another option is to mail your payment to:
Indiana Department of Revenue
P.O. Box 7224
Indianapolis, IN 46207-7224
You may pay in person at one of DOR’s district offices with cash, but with
the exact amount only. Other in-person options include paying with a
money order, cashier’s check or personal check made payable to DOR.
Note. All payments to DOR must be made with U.S. Funds.
Payment plan option. If you cannot pay the full amount due at the
time you file, you may be eligible to set up a payment plan online
using DOR’s e-services portal, the Indiana Taxpayer Information
Management Engine (INTIME), at intime.dor.in.gov. INTIME offers
customers the ability to manage their tax account(s) in one convenient
IT-40 Booklet 2023

Page 11

Schedule 1: Add-Backs

Where to Mail Your Tax Return

location, 24/7. Create an INTIME logon to manage your account,
make payments, establish payment plans, and more. After your return
finishes processing, a payment plan can be established.

If you are enclosing a payment, please mail your tax return with all
enclosures to:
Indiana Department of Revenue
P.O. Box 7224
Indianapolis, IN 46207-7224

Important. If using the payment plan option, penalty and interest will
be due on all amounts paid after the April 15, 2024, due date.
If you have questions, contact DOR in one of three ways:
•	 Use the secure messaging feature in the Indiana Taxpayer
Information Management Engine (INTIME). If you are not
registered, create an online account at intime.dor.in.gov. Select
“New to INTIME? Sign up” and follow instructions to complete
the process. You will need your taxpayer ID (FEIN, SSN, etc.) and
the unique Letter ID, printed in the upper-right hand corner of
this letter. Once logged in, select “Respond to a letter, notice, or
bill” under the “All Actions” menu.
•	 Call DOR Customer Service at 317-232-2240, Monday through
Friday, 8 a.m. - 4:30 p.m. EST.
•	 Correspond with DOR via mail using this address:
Indiana Department of Revenue
100 N. Senate Ave.
Indianapolis, IN 46204-2253

Returned Checks and Other Types of Payments

If you make a tax payment with a check, credit card, debit card,
electronic funds transfer, or any other instrument in payment by any
commercially allowable means, and DOR is unable to obtain payment
for its full amount when it is presented for payment through normal
banking channels, a $35 penalty will be assessed.
The assessed amount will be due immediately upon receipt of the tax
due notice and must be paid by certified check, bank draft or money
order. Note. Any permits and/or licenses issued by DOR may be revoked
if the assessed amount is not paid immediately.

Signatures and Signing Dates

First, read the Authorization area on Schedule 7. Then, sign and date
the tax return. If this is a jointly filed tax return, both you and your
spouse must sign and date it. Make sure to enclose the completed
Schedule 7 when filing.

Taxpayer Advocate

As prescribed by the Taxpayer Bill of Rights, DOR has an appointed
Taxpayer Advocate whose purpose is to facilitate the resolution of taxpayer
complaints and complex tax issues. If you have a complex tax issue, you
must first pursue resolution through normal channels, such as contacting
the customer service division at 317-232-2240. If you are still unable to
resolve your tax issue, or a tax assessment places an undue hardship on
you, you may receive assistance from the Office of the Taxpayer Advocate.
For more information, and to get required schedules if filing for an
offer in compromise or a hardship case, visit our website at: www.
in.gov/dor/contact-us/tao. You may also contact the Office of the
Taxpayer Advocate directly at [email protected], or by telephone
at 317-232-4692. Submit supporting information and documents to:
Indiana Department of Revenue, Office of the Taxpayer Advocate, P.O.
Box 6155, Indianapolis, IN 46206-6155.
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IT-40 Booklet 2023

For all other filings, please mail your tax return with all enclosures to:
Indiana Department of Revenue
P.O. Box 40
Indianapolis, IN 46206-0040

Schedule 1: Add-Backs

Some amounts reported on your federal tax return may require
different treatment for Indiana income tax purposes. Listed in this
area are those items that may need to be added back on your Indiana
tax return. Please review the list carefully. When reporting these
add-backs, maintain with your records the corresponding federal tax
forms and schedules as DOR can require you to provide them at a
later date.

Important Information About Possible Year-End
Federal Legislation

This publication was finalized before all year-end federal legislative
changes were complete. Therefore, some of these add-backs may need
to be adjusted. You may wish to periodically check DOR’s homepage
at www.in.gov/dor for updates about any impact of late federal
legislation.

Treatment of Previously Discontinued Add-Back

Several discontinued add-backs were created as a result of timing
differences between federal and Indiana allowable expenses. See
Certain Discontinued Add-Backs: How and When to Report a Final
Catch-Up Modification on page 15 for information about these
add-backs.

Line 1 – Tax Add-Back

If you did not complete Federal Schedules C, E or F, which include
sole proprietorship income, farm income, rental, partnership, S
corporation, and trust and estate income (or loss), then do not
complete this line.
On those schedules you are allowed to claim a deduction for taxes paid
which are:
•	 based on, or
•	 measured by income, and
•	 levied at a state level by any state in the United States.
If you claimed this kind of deduction on any of these schedules,
then you must add it back to your Indiana income. Do not add back
property taxes on this line.
State-level pass through entity taxes that are deducted in determining
your federal adjusted gross income should be added back on this line.
If you subsequently receive a refund of those taxes, report the refund
on this line as a deduction.

Schedule 1: Add-Backs Continued

method, he has to add back $1,500 on his Indiana tax return.

Wagering Taxes. The portion of wagering taxes required to be added
back as a tax based on or measured by income is being reduced (phased
out). The percentage of taxes required to be added back is determined
by the first date of the taxpayer’s taxable year, and is determined as
follows: 2020 – 75%; 2021 – 62.5%; 2022 – 50%; 2023 – 37.5% 2024 –
25.0%; 2025 – 12.5%; 2026 and later – no add back required.

Note. After making an initial adjustment for bonus depreciation you
will need to refigure the amount of depreciation available for state tax
purposes for subsequent years.

For example, Casino X deducts $10,000,000 in wagering taxes in 2023.
Individual owns 10% of Casino X. Individual’s share of Casino X’s
income taxes is $1,000,000. Instead of individual adding back the full
$1,000,000, Individual will add back $375,000.
Note. Income, losses and/or expenses from other schedules and
forms may flow through to federal Schedules C, E and F. For example,
partnership income from federal Schedule K-1 (Form 1065) may be
included on federal Schedule E, while expenses from federal Form
8829 may be included on federal Schedule C. Make sure to check these
schedules and forms for any deduction that needs to be added back.

Line 2 – Net Operating Loss Add-Back

Any net operating loss (NOL) deduction reported on line 8 of your
federal Schedule 1 must be added back on this line. Write the amount
of the net operating loss as a positive figure. (You may be eligible to
claim an Indiana net operating loss deduction on Schedule 2, under
line 9.)

Example. Ann made an initial adjustment for bonus depreciation on
last year’s Indiana tax return. This year she figures she is entitled to
a $150 additional depreciation amount for state tax purposes. She
should enter that amount as a negative entry, or -150, on line 4.
Special rules may apply if the bonus depreciation is taken against
property acquired in a like-kind exchange or acquired in a taxable
year in which you have an excess business loss. See Income Tax
Information Bulletin #118 at www.in.gov/dor/files/reference/ib118.pdf
for additional information.

Line 5 – Section 179 Expense Add-Back

You may have figured an IRC Section 179 expense using a ceiling
of more than $25,000 for federal tax purposes. Indiana allows you
to figure IRC Section 179 expense using a ceiling of no more than
$25,000. If you figured IRC Section 179 expense using a ceiling
amount of more than $25,000, you will need to add back the difference
between it and $25,000 on line 5.

Note. Leave this line blank if you did not report a net operating loss
deduction on line 8a of your federal Schedule 1.

Special rules may apply if the bonus depreciation is taken against
property acquired in a like-kind exchange or acquired in a taxable
year in which you have an excess business loss. See Income Tax
Information Bulletin #118 at www.in.gov/dor/files/reference/ib118.pdf
for additional information.

Line 3 – OOS Municipal Obligation Interest Add-Back

Line 6 – Other Add-Backs

Interest earned from a direct obligation of a state or political
subdivision other than Indiana (out of state, or OOS) is taxable by
Indiana if the obligation is acquired after Dec. 31, 2011. Interest earned
from obligations held or acquired before Jan. 1, 2012, is not subject to
Indiana income tax and should not be reported as an add-back.
Note. Interest earned from obligations of Puerto Rico, Guam, Virgin
Islands, American Samoa, or Northern Mariana is not included in
federal gross income and is exempt under federal law. There is no addback for interest earned on these obligations.
For more information about this add-back, see Income Tax
Information Bulletin #19 at www.in.gov/dor/files/reference/ib19.pdf.

Line 4 – Bonus Depreciation Add-Back

You must make an exception for any bonus depreciation deduction
used for property placed in service after Sept. 11, 2001. Bonus
depreciation is the additional first-year special depreciation deduction
allowed under Section 168(k) of the Internal Revenue Code (IRC).
Figure the net income (or loss) that would have been included in
federal adjusted gross income had the bonus depreciation method
not been used. Then, enter the difference, which may be a positive or
negative amount, on line 4.
Example. Mack used the bonus depreciation method for federal income
tax purposes. After refiguring the depreciation without using the bonus

Each of the following add-backs has been assigned a 3-digit code
number. When reporting the add-back, write its name, the associated
3-digit number and the amount.

Conformity Add-Back

Before this publication was finalized Indiana had not conformed
to any changes to the Internal Revenue Code (IRC) that may have
become law after January 1, 2023. Therefore, the IRC used to figure
Indiana income may not wind up being the same as the IRC used to
figure federal income.
This add-back is specific to these annual current year conformity
issues. If uncertainty exists as to whether or not Indiana will adopt
some or all of the federal legislation passed after January 1, 2023,
that acts to modify federal AGI, you may add-back those items as an
“other” add-back. In the event those items are adopted, an amended
return should be filed to recoup the add-back(s).
Conformity Add-Back – Positive Entry  120
This add-back is only for:
•	 current year conformity issues, and
•	 add-backs required by Indiana legislation passed retroactively to
years before 2023.
Conformity issues for preceding tax years must be addressed on the
add-back line specific to the item in question.
IT-40 Booklet 2023

Page 13

Schedule 1: Add-Backs Continued
If the state legislature does not conform to federal code changes
enacted after January 1, 2023, you may have to amend your return at
a later date to reflect any differences between Indiana and federal law.
You may wish to periodically check DOR’s homepage at www.in.gov/
dor for updates.
Enter code 120 on Schedule 1 under line 6 if reporting this add-back.
Conformity Add-Back – Negative Entry  147
This add-back generally is based on conformity issues arising from a
previous year or on deductions enacted by Indiana legislation passed
retroactively to years before 2023. However, in rare cases this can arise
from conformity issues arising in the current year where the IRC treats
an item as taxable or nondeductible that was previously exempt or
deductible.
Enter code 147 on Schedule 1 under line 6 if reporting this add-back.

Employer Student Loan Payment Add-Back  148

If your employer paid any amount for your student loans and you
excluded the payment from your federal gross income, add back the
amount you excluded from your gross income. This amount must be
added back regardless of whether your employer paid you the amount
for your student loans or whether your employer paid the student loan
on your behalf. Also see the instructions for the deduction for the
Employer Student Loan Payment Interest Deduction on page 20.

179 expensing, and the add-back for state and local taxes deducted
in determining federal adjusted gross income. Do not report
modifications arising from prior year Indiana modifications such as
bonus depreciation catch-up modifications.
First, if you have such add-backs, report the add-backs in the normal
manner as if no excess business loss limitation was in effect under IRC
section 461(l). Second, report the lesser of these add-backs required
for Indiana purposes or the IRC section 461(l) disallowance (Form
1040, Schedule 1, Line 8p) as a Code 151 deduction.
The Code 151 deduction will reduce the net operating loss
carryforward allowable for Indiana purposes.
Example. Bob has $100,000 of federal adjusted gross income,
consisting of $370,000 salary and a $270,000 allowable loss from
Partnership A. Bob has a $300,000 excess business loss disallowed
from Partnership A. Bob’s share of Partnership A’s income included
$470,000 in losses other than bonus depreciation and $100,000 of
bonus depreciation, of which only $270,000 of cumulative losses
are allowed in the current year. Bob otherwise has an $80,000
bonus depreciation add-back for Indiana purposes. Bob will report
the $80,000 add-back for bonus depreciation and also report an
$80,000 deduction using Code 151. This will also result reduce the
net operating loss for the current year to $220,000 ($300,000 excess
business loss minus $80,000).

IRC Section 163(j) limits the federal interest deduction for most
business interest to 30% (50% for 2019 and 2020 in certain cases)
of adjusted taxable income plus business interest. However, Indiana
has decoupled from this provision. Subtract an amount equal to the
amount as a deduction for excess business interest under IRC Section
163(j) in the year in which the interest was first paid or accrued. If you
are deducting any business interest carried over from a previous year,
add the amount of this interest deducted. Enter code 142 on Schedule
1 under line 6 if reporting this