Section 45 IAC 3.1-4-10 - Credit for taxes paid to out-of-state local governmentsAuthority: IC 6-8.1-3-3
Affected: IC 6-3-3-3; IC 6-3.6
Sec. 10.
(a) Taxpayers subject to county tax at the resident rate may take a credit against local income tax (LIT) liability for taxes paid to localities outside of Indiana.(b) The credit is limited to:(1) the amount of tax paid to the out-of-state locality;(2) the county rate times the amount of adjusted gross income that was taxed by the other locality; or(3) the amount of LIT due, whichever is the least. This does not apply to income taxed by any state but only to income taxed by any subdivision of any state, such as a city or county, outside of Indiana.(c) For each locality, the credit and the limitations under subsection (b) shall be computed separately.(d) To claim the credit under subsection (b), the tax must actually be paid. If the tax is reduced by any credit, other than a credit for taxes withheld, the tax paid will be reduced by such credit.(e) The credit is limited only to taxes for which the individual is personally liable or for taxes reported by a pass-through entity on behalf of the individual by inclusion in a composite tax return filed by the entity. If the individual owns an interest in a partnership, S corporation, trust, or similar entity for which the entity is subject to a local income tax but the individual is not subject to local income tax on that income, the tax paid by the entity is not eligible for this credit. To claim the credit, the taxpayer must provide evidence of payment of the claimed tax to the out-of-state subdivision. A copy of the tax return filed with the other locality or a tax statement indicating such payment, such as a Form W-2 or Form 1099, must be attached to the Indiana return.(f) The credit will not be allowed if the laws of such city or county provide for a credit to the taxpayer for the amount of LIT payable.(g) The credit is not permitted for any state-level taxes paid in excess of the amount permitted under IC 6-3-3-3.Department of State Revenue; 45 IAC 3.1-4-10; filed 5/10/2017, 3:04 p.m.: 20170607-IR-045160491FRAReadopted filed 8/11/2023, 10:08 a.m.: 20230906-IR-045230534RFA