A new paper from the Tax Foundation reveals tax changes awaiting taxpayers and businesses in Indiana and across the nation on January 1.
The Tax Foundation shares that “most of these changes represent net tax reductions, the result of an unprecedented wave of rate reductions and other tax cuts in the past two years as states respond to burgeoning revenues, greater tax competition in an era of enhanced mobility and the impact of high inflation on residents.”
For starters, under House Bill 1002 (enacted in March 2022), Indiana’s flat individual income tax rate will be reduced from 3.23 to 3.15% effective for 2023 and 2024, with triggers in place that could reduce the rate to 2.9% by 2029 if specified conditions are met.
“The decrease in Indiana’s flat individual income tax rate will potentially benefit Hoosier business owners, particularly those who operate as pass-through entities, by reducing their tax burden and allowing them to retain more of their income,” says David Ober, Indiana Chamber vice president of taxation and public finance. “This decrease in the individual income tax rate, combined with the potential further reduction by 2029 could provide a boost to the profitability of businesses in Indiana and potentially encourage entrepreneurship and economic growth in the state.”
Other key findings for Indiana:
- Additionally, under HB 1260, Indiana’s $3,000 mortgage deduction will be repealed, while the property tax homestead deduction will increase by $3,000, allowing taxpayers to deduct the lesser of 60% of the assessed value of the property or $48,000 (up from $45,000) in 2022. Senior citizens also may claim a tax deduction on homes valued up to $240,000 (up from $200,000) in 2022.
- And under SB 382, Indiana is phasing out its add-back of the federal income tax deduction allowed for wagering taxes, with the add-back decreasing from 50 to 37.5% of the federal amount.
Read the full report for more on changes coming to other parts of the country.
