How to Fill Out and File the Indiana IT-40 Tax Return

The Indiana IT-40 tax return is the annual income tax return for people who lived in Indiana for the entire calendar year. You start with the adjusted gross income from your federal Form 1040, make Indiana-specific adjustments, apply the flat state rate of 2.95% for the 2026 tax year, add your county’s income tax, and then subtract withholding and credits to arrive at what you owe or will be refunded.1Indiana Department of Revenue. Rates, Fees and Penalties You can file through the state’s INTIME portal or on paper, and the deadline is April 15.

Who Should Use the IT-40

The IT-40 is for full-year Indiana residents. Under state rules, a resident is anyone domiciled in Indiana for the tax year or anyone who keeps a permanent residence in Indiana and spends more than 183 days in the state.2Indiana General Assembly. 45 IAC 3.1-1-21 Resident Defined Domicile holds until you take deliberate steps to establish a new one somewhere else; a long work trip or a few months out of state doesn’t break it.

You must file if your gross income exceeds your total exemptions. The Department of Revenue uses a rough $1,000 trigger.3Indiana Department of Revenue. Individual Income Tax Overview Even below that, file if any Indiana tax was withheld from your pay, because that’s the only way to get it back.

If you moved into or out of Indiana during the year, or you lived in another state and earned Indiana income, the IT-40 isn’t your form. Use Form IT-40PNR for part-year and nonresident situations instead.4Indiana Department of Revenue. Military Service Members

What to Gather Before You Start

Pull these together first:

  • Your completed federal Form 1040. The IT-40 begins with line 11 of the 1040.
  • All W-2s and 1099s for the year.
  • Social Security numbers for you, your spouse if filing jointly, and every dependent.3Indiana Department of Revenue. Individual Income Tax Overview
  • Property tax statements or rent receipts for your principal Indiana residence.
  • Any other state’s income tax return, if you’ll be claiming the credit for tax paid elsewhere.

The IT-40 travels with a packet of schedules: Schedules 1, 2, 3, 5, 6, 7, CT-40, and IN-DEP. All are posted on the Department of Revenue’s forms page.5Indiana Department of Revenue. Current Year Individual Tax Forms

Filling Out the IT-40 Line by Line

The form moves in one direction: federal income, Indiana adjustments, exemptions, state tax, county tax, credits.

Line 1: Federal Adjusted Gross Income

Copy your federal AGI straight from Form 1040. Indiana conforms to the Internal Revenue Code at this starting point, so every later calculation builds on this number.6Indiana Department of Revenue. Indiana IT-40 Full-Year Resident Individual Income Tax Booklet

Schedule 1: Add-Backs

Indiana doesn’t follow every federal deduction or exclusion. Schedule 1 adds certain amounts back to your income. The common ones are bonus depreciation taken federally, any Section 179 expense above $25,000, state income tax deducted on a federal Schedule C or E, and interest on non-Indiana municipal bonds. If none of those apply, Schedule 1 is zero.

Schedule 2: Deductions

Schedule 2 is where Indiana subtracts income the federal government taxed. The two deductions most filers use:

  • Renter’s deduction: up to $3,000 of rent paid on your principal Indiana residence, or $1,500 if married filing separately.7Indiana Department of Revenue. Schedule 2
  • Homeowner’s property tax deduction: up to $2,500 of Indiana property taxes on your principal residence, or $1,250 if married filing separately.7Indiana Department of Revenue. Schedule 2

Schedule 2 also handles taxable Social Security benefits (Indiana doesn’t tax them, so the full taxable amount from your federal return gets deducted here), interest on U.S. government obligations, an active-duty military deduction, a $1,000-per-child private school or homeschool deduction, and Indiana net operating losses.

Exemptions and Dependents

After add-backs and deductions, subtract personal exemptions for yourself, your spouse if filing jointly, and each qualifying dependent. The dollar amounts for each exemption appear in the IT-40 instruction booklet for your filing year. Dependents are listed on Schedule IN-DEP, which attaches to the return.

Calculating the State Tax

Multiply your Indiana taxable income by 2.95% for the 2026 tax year.1Indiana Department of Revenue. Rates, Fees and Penalties The rate drops to 2.90% in 2027. That gives you your state tax liability before credits.

Adding Your County Income Tax on Schedule CT-40

Every Indiana county charges its own income tax on top of the state rate. Your county for tax purposes is where you lived on January 1 of the tax year, not where you worked.8Indiana Department of Revenue. Schedule CT-40 Rates across the 92 counties run from 0.5% to 3.0%, and the current list sits on the back of Schedule CT-40.9Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax

Take the same taxable income from line 7 of the IT-40, multiply by your county rate, and enter the result on line 9. If you moved during the year, double-check which county you lived in on January 1. That’s a frequent source of errors.

Credits and Withholding

Credits bring the bill down. Schedule 5 is for Indiana state and county tax already withheld from your paychecks, plus any estimated payments. Schedule 6 handles offset credits.

If you paid income tax to another state on income Indiana is also taxing, Schedule 6 gives you a credit so the same dollars aren’t taxed twice. The credit is the smallest of three figures: the tax actually paid to the other state, the Indiana rate applied to the doubly taxed income, or your total Indiana tax due.10Indiana Department of Revenue. Income Tax Information Bulletin 28 Attach a copy of the other state’s return and the calculation worksheet.

Residents 65 or older by the end of the tax year may qualify for the Unified Tax Credit for the Elderly, which can wipe out most or all of the Indiana liability. Seniors with very low income (under $2,500 single, under $5,000 for a couple where both are 65 or older) can skip the IT-40 entirely and file the one-page Form SC-40.11Indiana Department of Revenue. Seniors

How to Submit the Return

Filing Electronically

INTIME, the Department of Revenue’s online portal, handles filing, payment, and refund tracking in one place.12Indiana Department of Revenue. INTIME Submitting gives you an immediate confirmation number that serves as proof of filing, and you can schedule any payment through the same screen. E-filed returns are typically processed in about three weeks.

Lower-income filers can use INfreefile, which routes you to commercial tax software for free federal and state filing. Eligibility varies by vendor but generally covers filers with AGI at or below $89,000, and active-duty military members get expanded eligibility.13Indiana Department of Revenue. Free File

Filing on Paper

Paper returns go to one of two P.O. Boxes depending on whether money is enclosed:

  • With payment: Indiana Department of Revenue, P.O. Box 7224, Indianapolis, IN 46207-7224.14Indiana Department of Revenue. Mail in Tax Forms
  • Refund or zero balance: Indiana Department of Revenue, P.O. Box 40, Indianapolis, IN 46206-0040.14Indiana Department of Revenue. Mail in Tax Forms

Mailing to the wrong box won’t invalidate the return, but it slows things down. Paper returns can take up to twelve weeks to process.

Deadline and Extensions

The IT-40 is due April 15, the same day as the federal return. If you need more time, Indiana offers two paths:

An extension buys you more time to file, not more time to pay. Interest and penalties still accrue on any unpaid balance after April 15.

If You File Late or Don’t Pay in Full

Missing the deadline or underpaying triggers a 10% penalty under Indiana Code 6-8.1-10-2.1. The penalty applies to the full tax due if you didn’t file, the unpaid portion if you filed but didn’t pay, or any deficiency found during a Department review.16Indiana General Assembly. Indiana Code Title 6 Taxation 6-8.1-10-2.1 Interest runs on any unpaid balance from the original due date at a rate the tax commissioner sets each year.17Indiana General Assembly. Indiana Code Title 6 Taxation 6-8.1-10-1

File on time even if you can’t pay the full balance. That alone avoids the 10% failure-to-file penalty. If you owe more than $100, you can set up a payment plan through INTIME without calling the Department, choosing monthly or bi-weekly installments and the number of payments.18Indiana Department of Revenue. Set Up a Payment Plan Interest and penalties keep accruing on whatever is still owed during the plan.

Separately, if you expect to owe $1,000 or more that isn’t being covered by employer withholding (common for self-employed workers, landlords, and filers with significant investment income), make quarterly estimated payments using Form ES-40. The due dates are April 15, June 15, September 15, and the following January 15.19Indiana Department of Revenue. Estimated Payments

Fixing a Return You’ve Already Filed

If you catch a mistake after filing (missed deduction, wrong income figure, change caused by an amended federal return), file an amended IT-40. For 2021 and later, there’s no separate amendment form: you submit a corrected IT-40 and mark it “Amended.”20Indiana Department of Revenue. Amend A Return For 2020 and earlier, use Form IT-40X.

You have three years from the original due date, or the date you paid the tax if that’s later, to file the amendment.20Indiana Department of Revenue. Amend A Return When the IRS changes your federal return through an audit or your own federal amendment, that almost always moves your Indiana numbers too. Recalculate the IT-40 using the corrected federal AGI and file the amended state return promptly.