1040-IN: Credit for taxes paid to other states

Alerts and notices

State taxes

When Indiana is the resident state and income is taxable to both Indiana and another state, information you entered on the other state nonresident return transfers to the INSTCr screen and calculates the Indiana Other State Credit Worksheet. This worksheet determines the credit you can claim on Indiana Form IT-40, Schedule 6. You must complete the nonresident return (or federal Form 1116 for foreign taxes paid) first in order to properly calculate the Indiana credit. If you are not preparing the nonresident return (or Form 1116) in UltraTax CS, manually enter the information in the INSTCr screen. 

Part-year returns: When the taxpayer is a part-year resident of at least one state, information does not transfer to any of the STCr screens for states. You must manually enter the information.

Arizona, Oregon, and Washington D.C. (reverse agreement states)

Indiana has a reverse agreement with Arizona, Oregon, and Washington D.C. where if income is taxed to both Indiana and either of these states, the credit is claimed on the nonresident return. So if Indiana is the resident state, information will transfer to the AZ or OR STCr screen. Likewise, if AZ or OR is the resident state, information will transfer to the INSTCr screen and calculate the credit on Form IT-40PNR, Schedule G. 

When a taxpayer is a resident of Washington DC and has nonresident Indiana income that was double-taxed, you must manually enter it on the INSTCr screen. Washington DC doesn't tax nonresident income so income will not be double taxed if you are processing on nonresident DC return. Since income isn't double-taxed, a credit will not calculate.

Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin (reciprocal states)

Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin have a reciprocal agreement with Indiana and do not tax wages if the taxpayer is an Indiana resident. So if a taxpayer is filing a nonresident return with any of these states, the taxable income that transfers to the INSTCr screen will not include wages. 

Local taxes

The Indiana Credit for Local Taxes Paid Outside Indiana will calculate if you:

The Indiana Credit for Local Taxes Paid Outside Indiana Worksheet will use any of these amounts, the appropriate Indiana county tax rate, and the county tax reported on Form IT-40/40PNR to calculate a credit on Schedule 6 or G.

Note: When you force amount(s) in the Income taxed by non-Indiana locality (Force) field, the credit on Schedule 6 or G is limited to the lesser of the amount you enter in that field or the county tax on Form IT-40/40PNR.

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