The Indiana IT-40 tax form is the annual state income tax return filed by anyone who was a full-year Indiana resident during the tax year. It handles two layers of tax at once: the state individual income tax, which drops to a flat 2.95% for tax year 2026 from 3.00% in 2025 under scheduled rate reductions written into state law,1Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate and the local income tax that every Indiana county levies on top of the state rate. Filing correctly means knowing which schedules you need, what Indiana-specific deductions and credits apply, and how the county piece gets calculated.
Who Has To File an IT-40
You file the IT-40 if you were a full-year Indiana resident, meaning your legal residence was in Indiana from January 1 through December 31.2Indiana Department of Revenue. Individual Income Tax Overview Indiana treats you as a resident either because you were domiciled in the state during the year, even if you spent time elsewhere, or because you maintained a permanent home in Indiana and spent more than 183 days in the state. The 183-day test requires both the home and the days, not just one.3Indiana General Assembly. Indiana Code 6-3-1-12 – Resident
The income threshold is low. If your gross income exceeds your total exemptions, you have to file. For a single person with no other exemptions, that generally means filing once income reaches $1,000. For a married couple filing jointly, each spouse brings a $1,000 exemption, so the practical threshold is $2,000.4Indiana Department of Revenue. Who Should File a Tax Return
One boundary worth knowing: if you were only a part-year resident, or a nonresident who earned Indiana income, the IT-40 is the wrong form. You’d file the IT-40PNR instead. College students whose permanent address is their parents’ Indiana home still count as full-year residents even when attending school out of state, so the IT-40 is still their form.5Indiana Department of Revenue. Student Taxes
How the IT-40 Calculates What You Owe
The starting point is your federal adjusted gross income, taken directly from line 11 of your federal Form 1040.6Indiana Department of Revenue. Your Indiana Tax Return Line By Line That figure runs through three schedules before Indiana applies its tax rate.
Schedule 1: Add-Backs
Some items that reduced your federal taxable income get added back for Indiana. The most common is state and local taxes: if you itemized federally and deducted Indiana income taxes, you add that amount back here.7Indiana Department of Revenue. Indiana Add-Backs Certain bonus depreciation amounts and out-of-state municipal bond interest also get added back. Most wage earners with simple returns have nothing to add.
Schedule 2: Indiana Deductions
Indiana has its own set of deductions that lower your state taxable income whether or not you itemized federally. Two of the most used:
- Renter’s deduction: the lesser of $3,000 or the rent you actually paid during the year. Married couples filing separately are limited to $1,500 each.8Indiana Department of Revenue. Renters Deduction Information Bulletin 38
- Homeowner’s property tax deduction: the lesser of $2,500 or the property taxes you paid on your principal residence. The cap drops to $1,250 if married filing separately.9Indiana Department of Revenue. Deductions
Schedule 2 also carries deductions for taxable Social Security benefits, interest on U.S. government obligations, and $1,000 per qualifying child for private school or homeschool costs, among others. These are Indiana-only deductions with no federal equivalent, which makes them easy to miss.10Indiana Department of Revenue. Schedule 2 Deductions
Schedule 3: Exemptions
Personal exemptions come off next:11Indiana Department of Revenue. Schedule 3 Exemptions
- $1,000 each for you and your spouse
- $1,000 per qualifying dependent
- An additional $1,500 per dependent child, or $3,000 the first year you claim that child12Indiana Department of Revenue. Deductions – Dependent Child Exemption Increase
- $1,000 for being age 65 or older, and another $1,000 for being blind
- An extra $500 per person age 65 or older when federal AGI is under $40,000 ($20,000 if married filing separately)
What’s left is your Indiana taxable income, which the state multiplies by the flat tax rate.
The County Tax Piece on Schedule CT-40
Every county in Indiana imposes its own income tax, calculated on Schedule CT-40 as part of the IT-40. You enter the county you lived in on January 1 of the tax year and apply that county’s rate to your Indiana taxable income.13Indiana Department of Revenue. Schedule CT-40 Rates vary across counties, so this is not a minor line item. If spouses lived in the same county on January 1, the full amount goes on one line. If they lived in different counties, each spouse calculates separately.
Your county of residence and your county of employment can differ. Employers withhold county tax based on the code you give them on your W-2, but tax is actually owed to the county where you lived on January 1. Any gap between withholding and what you owe shows up on the return as additional tax due or part of your refund.
Credits That Cut Your Tax Dollar-for-Dollar
Credits apply after state and county tax are calculated, and they reduce the tax owed directly rather than lowering taxable income.
The CollegeChoice 529 credit is one of the most valuable. You get a credit equal to 20% of your contributions to an Indiana 529 plan during the year, capped at $1,000 ($500 each if married filing separately).14Indiana Department of Revenue. Indiana 529 Savings Plan Credit Information Bulletin 98 A $5,000 contribution hits the full $1,000 credit.
Residents age 65 or older may qualify for the Unified Tax Credit for the Elderly. Low-income seniors can claim it on the IT-40, or use the simplified one-page Form SC-40 if their income is low enough: under $2,500 for a single filer, under $3,500 for a married couple where one spouse is 65 or older, and under $5,000 where both are 65 or older.15Indiana Department of Revenue. Seniors
Deadline, Extensions, and How To File
The IT-40 for tax year 2025 is due April 15, 2026.16Indiana Department of Revenue. IT-40 Full-Year Resident Individual Income Tax Booklet If you need more time, file Form IT-9 through the state’s INTIME portal or by mail before the April deadline. Indiana automatically honors any federal extension you already have, so if you’ve extended federally there’s nothing extra to file with the state.17Indiana Department of Revenue. Extension of Time to File
An extension pushes the filing date to November 16, 2026, but it does not push the payment date. Any tax you owe is still due April 15, and penalties and interest accrue on the unpaid balance from that day forward. This is the single most common extension mistake: assuming more time to file means more time to pay.
The fastest way to submit the return is electronically, either through INTIME or approved tax software. E-filed returns typically produce refunds within two to three weeks and give immediate confirmation of receipt.18Indiana Department of Revenue. INTIME Paper filers mail the return to one of two addresses:
- No payment enclosed: Indiana Department of Revenue, P.O. Box 40, Indianapolis, IN 46206-0040
- Payment enclosed: Indiana Department of Revenue, P.O. Box 7224, Indianapolis, IN 46207-7224
Either way, the envelope has to be postmarked by April 15. You can also pay online through INTIME even if you file the return itself on paper.
What Late Payment Costs
Missing the payment deadline triggers a penalty of 10% of the unpaid tax or $5, whichever is greater.19Indiana Department of Revenue. Rates, Fees and Penalties Interest also accrues on unpaid balances at a rate set annually; for calendar year 2026 the underpayment rate is 7%.20Indiana Department of Revenue. Interest Rates for Calendar Year 2026 On a $2,000 unpaid balance, that’s $200 in penalty on day one plus interest running until the balance clears.
If you can’t pay the full amount, contact the Department of Revenue through INTIME or by phone to set up a payment plan rather than ignoring the bill. The penalty still applies, but a plan keeps the balance from escalating to collections.
Fixing a Return After You File
If you find an error after filing, you can amend the IT-40 through INTIME for tax years 2021 and later. You have three years from the original due date or the date you paid, whichever is later, to file the amended return.21Indiana Department of Revenue. Amend a Return Typical reasons include a corrected W-2, a missed deduction or credit, or a change to your federal return. Any time your federal return changes, Indiana expects a matching amended state return.