As you may have seen, the Indiana Senate Bill 2: Taxation of Pass-Through Entities (SB2) has been signed into law by Governor Holcomb.

This bill provides pass-through entities (PTEs) an election to pay Indiana income tax at the entity level, based upon an individual owner’s share of income. The election creates a tax credit for the individuals/owner(s) which offsets the individual’s personal income tax liability. The savings opportunity is this can maximize your state tax deduction for Federal purposes and reduce your Federal taxable income.

Additional information

• The Indiana Pass-Through Entity Tax rate is the individual rate of 3.23%. It does not include county taxes.
• The election will be made via a hardcopy form mailed directly to the Department. In the initial year, the election will not be available to be filed electronically. This is expected to change for 2023.
• The deduction for state taxes paid will be deducted from federal ordinary income in the year the taxes are paid (2023 in most cases).
• Because of the retroactive nature of the bill, the 2022 election must be made after March 31, 2023, and before August 31, 2024.

We are monitoring the Indiana Department of Revenue’s readiness to accept the election and produce the forms to accommodate the new tax as well as the readiness of the tax software providers to implement the change. This means clients who benefit from this election will need to file extensions. 

If you have any questions or concerns, please do not hesitate to contact your HSC service leader or call our office at 800.880.7800.

Indiana taxpayers may receive a state income tax credit equal to 20% of their contributions to a CollegeChoice 529 account, up to $1,000 per year ($500 for married filing separately) through December 31, 2022. Contributions by Indiana taxpayers made on or after January 1, 2023, will qualify for the 20% tax credit, with a new maximum of up to $1,500 ($750 for married filing separately).

Find more information here.

We are monitoring a bill currently being fast tracked through the Indiana Senate that may provide a tax savings opportunity for 2022 taxes, so we want to ensure you are aware of it and know that we are addressing it.

Senate Bill 2: Taxation of Pass-Through Entities (SB2) is a highly supported and fast-moving bill that aims to allow pass-through entities (PTEs) an election to pay Indiana income tax at the entity level, based upon an individual owner’s share of income. The election creates a tax credit for the individuals/owner(s) which offsets the individual’s personal income tax liability. The savings opportunity is this can maximize your state tax deduction for Federal purposes and reduce your Federal taxable income.

What does that mean for you? The bill, if successful, would not become effective until mid-February 2023. However, the legislature intends for the credit to be retroactively available. For a small group of taxpayers this may affect your 2022 tax return. 

We expect this bill to pass. Because of the retroactive nature of the bill, the 2022 election cannot be made until March 31, 2023. The federal filing deadline for pass-through entities is March 15, 2023. That means those clients who may benefit from the election on their 2022 tax return should consider filing extensions. Some taxpayers will not benefit on their 2022 tax return but will benefit on 2023 taxes.

What are we doing to advise? We are currently working on personalized recommendations for our clients. We will weigh the advantages and disadvantages associated with making this election and if the tax savings is realized on the 2022 tax return or the 2023 tax return. Personalized evaluations take into consideration each client’s unique circumstances.

If you have any questions or concerns, please do not hesitate to contact your HSC service leader at 800-880-7800.

Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.