Indiana Tax Changes
May 21, 2013

On May 8, 2013, Indiana Governor Mike Pence signed into law House bill H1001, making numerous changes to Indiana tax law. The bill eliminates many Indiana add-back modifications to income, recoupling Indiana with the Internal Revenue Code. Add-back eliminations are effective retroactively to January 1, 2012. The Department of Revenue ("DOR") has not yet issued guidance as to whether there will be a way for taxpayers that have already filed their 2012 individual income tax return to claim a refund of taxes paid on the eliminated modifications other than by amending their income tax return.

Some of the most common add-backs eliminated include:

  • IRA charitable distribution
  • Qualified tuition and fees
  • Accelerated depreciation on qualified leasehold, retail, or restaurant property
  • Student loan interest

Other highlights include:

  • Beginning January 1, 2015, Indiana's adjusted gross income tax rate on individuals will decrease to 3.3% and then to 3.23% after December 31, 2016. The current rate is 3.4%.
  • Effective retroactively to January 1, 2013, the Indiana inheritance tax has been repealed. The Inheritance tax was previously scheduled to phase out by December 31, 2021. In addition, no Consents to Transfer (Form IH-14) personal property or Notice of Intended Transfer of Checking Account (Form IH-19) are required for those dying after December 31, 2012.
  • Effective July 1, 2013, the sales tax exemption for research and development equipment will be expanded to include any tangible personal property used for research and development.