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Credit for taxes paid to other states

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. Complete the nonresident return (or federal Form 1116 for foreign taxes paid) first to calculate the Indiana credit properly. If you're not preparing the nonresident return (or Form 1116) in UltraTax CS, manually enter the information in the
INSTCr
 screen.
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'll need to enter it on the
INSTCr
 screen manually. Washington DC doesn't tax nonresident income so income won’t be double taxed if you are processing on nonresident DC return. Since income isn't double-taxed, a credit won’t calculate.
Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin (reciprocal states)
Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin have a reciprocal agreement with Indiana and don’t 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 won’t include wages.

Local taxes

The Indiana Credit for Local Taxes Paid Outside Indiana will calculate if you:
  • Enter local withholding from a state other than Indiana (or states that have reciprocal agreements) on the federal
    W2
     screen in the
    Income
     folder.
  • Enter local wages from KY, MI, MO, or OH and
    State use
    code
    18
     on the federal
    W2
     screen, or
  • Enter amounts in the
    Income taxed by non-Indiana locality (Force)
    fields on the
    INCr
     screen in the
    Credits
     folder.
The Indiana Credit for Local Taxes Paid Outside Indiana Worksheet will use any of these amounts, the Indiana county tax rate, and the county tax reported on Form IT-40/40PNR to calculate a credit on Schedule 6 or G.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
  • State: Indiana
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