Indiana 529 Tax Credit: Amount, Eligibility, and How to Claim

The Indiana 529 tax credit is a state income tax credit equal to 20% of what you contribute to the Indiana529 Savings Plan during the year, up to $1,500 per return ($750 if you’re married filing separately). Because it’s a credit rather than a deduction, it comes straight off your Indiana tax bill. You claim it on Schedule IN-529, filed with your Form IT-40 or IT-40PNR.¹

How Much the Credit Is Worth

You hit the $1,500 maximum by contributing $7,500 in a tax year. Married filing separately caps out at $750, reached at $3,750 in contributions.² The cap applies per return, not per account or per beneficiary. Opening additional accounts or spreading contributions across several children doesn’t lift it.

The credit is nonrefundable, and Indiana does not allow a carryforward or carryback. If the credit exceeds your Indiana tax liability for the year after other credits are applied, the extra is gone.³ If your state tax bill is small, it can make sense to size your contribution so the resulting credit roughly matches what you actually owe.

Who Qualifies

You have to be an Indiana resident filing an Indiana income tax return for the year of the contribution. The Department of Revenue applies that residency rule strictly.²

The beneficiary does not need to live in Indiana, and there’s no required relationship between you and the beneficiary. You also don’t have to own the account. A grandparent, aunt, uncle, or family friend who is an Indiana resident can contribute to someone else’s Indiana529 account and claim the 20% credit on their own return.⁴ Multiple Indiana residents contributing to the same child’s account can each claim their own credit, up to $1,500 apiece.

Which Plan Qualifies

Only contributions to Indiana’s own plan — the Indiana529 Savings Plan, formerly CollegeChoice 529 — count toward the credit.² Contributing to another state’s 529 plan will not generate an Indiana credit, even if you live in Indiana and the beneficiary attends school here.

Within the plan, the investment portfolio you pick has no effect on eligibility. Rollovers from another state’s 529 into an Indiana529 account, however, are not new contributions and do not qualify. Only fresh dollars deposited into the account count.

When Contributions Count

Contributions made between January 1 and December 31 count toward that calendar year’s credit automatically. Indiana also lets you designate contributions made between January 1 and April 15 of the following year to the prior tax year.² The designation is irrevocable, and the deadline is the original due date of your return. Filing an extension does not extend it.

To make the designation online, you select the tax year during the contribution process. For mailed checks, include a letter of instruction identifying the prior year. You can also call the Indiana529 service center at 866-485-9415. Without one of those steps, the contribution defaults to the year it was actually made.²

How to Claim It on Your Return

Complete Schedule IN-529 and file it with your Form IT-40 or IT-40PNR.¹ Fill in the first eight lines of your state return first, because the credit is applied against your liability after other credits. The schedule collects your qualifying contributions, applies the 20% rate, and produces the credit figure that flows to your IT-40.

Tax software handles the schedule once you enter your contribution amounts. Paper filers must physically attach the completed schedule; leaving it off gets the credit denied and forces an amended return to fix. Hold onto your year-end statement from the Indiana529 plan administrator in case the Department of Revenue asks for verification.

K-12 Tuition Contributions

Contributions earmarked for K-12 tuition qualify for the same 20% credit as contributions intended for college. Starting in 2026, Indiana raises the K-12 withdrawal cap to $20,000 per beneficiary per year, above the federal $10,000.²

Two Indiana-specific limits are worth knowing before you commit funds to K-12 use. First, K-12 tuition paid to an out-of-state school is treated as a non-qualified withdrawal for Indiana purposes, even though federal law allows it. Second, at the K-12 level Indiana only counts tuition itself. Books, curriculum materials, tutoring, standardized test fees, dual enrollment costs, and educational therapy are all excluded.² Funds intended for K-12 tuition must be designated as such at the time of contribution through the plan administrator.

Credit Recapture

If you take a non-qualified withdrawal from your Indiana529 account, Indiana recaptures the credit you previously received. The recapture equals 20% of the non-qualified withdrawal, capped at the total credits claimed over the life of the account.⁵ You report it on the return for the year the withdrawal occurred, and partial non-qualified withdrawals trigger a proportional recapture.

One recapture scenario catches families off guard. Under SECURE 2.0, unused 529 funds can be rolled into a Roth IRA for the beneficiary (subject to a 15-year account age, a five-year seasoning rule on the contributions being rolled, the annual Roth contribution limit, and a $35,000 lifetime cap). Federally, that rollover is tax-free. Indiana, however, treats a 529-to-Roth IRA rollover as a non-qualified withdrawal for state purposes, so previously claimed credits on the rolled amounts are recaptured.² Contribute $7,500, claim the $1,500 credit, later roll that money into a Roth IRA, and you owe Indiana $1,500 on the next return.

1
Indiana Department of Revenue. Schedule IN-529
2
Indiana Department of Revenue. Income Tax Information Bulletin 98 – Indiana 529 Savings Plan Credit
3
Indiana General Assembly. Indiana Code Title 6 Taxation 6-3-3-12
4
Indiana529. Tax Advantages
5
Indiana Department of Revenue. Recapture of Indiana CollegeChoice 529 Education Savings Plan Credit