Indiana DOR shares changes for 2025 tax returnsINDIANAPOLIS – The Indiana Department of Revenue (DOR) wants individuals to be aware of some tax changes as the 2025 tax filing season approaches.Add-backs, credits, and deductions for Individual Income tax were approved by the 2025 Indiana General Assembly. Previously approved changes to the Individual Income tax rate for 2025 are now in effect. DOR’s compiled summary provides specifics regarding these and other Individual tax-related changes.Add-BacksThe portion of wagering taxes required to be added back as a tax based on or measured by income is being phased out. The percentage of taxes required to be added back for 2025 is 12.5%.CreditsAffordable and Workforce Housing Credit (3-digit code 871; 4-digit composite code 1871)A new tax credit provides for affordable and workforce housing and is awarded by the Indiana Housing and Community Development Authority. This credit must be reported on Schedule IN-OCC. Railroad Expenditures Tax Credit (3-digit code 882; 4-digit composite code 1882)A new railroad tax credit was established for taxpayers who make qualified railroad expenditures. Amount of credit is 50% of expenditures or number of track miles multiplied by $3,500, whichever is less. Taxpayers must apply to DOR for credit approval by completing Application for Railroad Tax Credit for Qualified Infrastructure Investment Form IN-RRTC. This credit must be reported on Schedule IN-OCC. New Rail Infrastructure Expenditures Tax Credit (3-digit code 883; 4-digit composite code 1883)A new railroad tax credit was established for taxpayers who make qualified new rail infrastructure expenditures. Amount of credit, whichever is less than $500,000 or 50% of expenditures. Taxpayers must apply to DOR for credit approval by completing Application for Railroad Tax Credit for Qualified Infrastructure Investment Form IN-RRTC. This credit must be reported on Schedule IN-OCC. Small Modular Nuclear Reactor Tax Credit (3-digit code 884; 4-digit composite code 1884)A new small modular nuclear reactor manufacturing expense credit was established for taxpayers who make qualified infrastructure investments. Amount of credit is 20% of qualified investment. Taxpayers wishing to claim the credit must mail a written request to DOR’s Tax Policy Division. This credit must be reported on Schedule IN-OCC. Physician Practice Ownership Tax Credit Change (3-digit code 880)New law expands the Physician Practice Ownership Tax Credit to practicing physicians (instead of only primary care physicians) who have an ownership interest in a physician practice. To receive this credit, the medical practice must apply to DOR for its physician owners by completing Physician Practice Ownership Tax Credit Application Form IN-PPOTC. Residential Historic Rehabilitation Credit Change (3-digit code 831)A $10,000 per project cap has been added for a taxpayer who completes preservation or rehabilitation of a historic property. The amount of the credit is equal to 20% or $10,000, whichever is less.DeductionsActive Military Pay Deduction Change100% deduction of military pay has been expanded to include members of Space Force, Public Health Service (USPHS) Commissioned Corps, and the National Oceanic and Atmospheric Administration (NOAA) Commissioned Officer Corps.Retirement Income or Survivor's Benefits Deduction ChangeMembers of Space Force, Public Health Service (USPHS) Commissioned Corps, and the National Oceanic and Atmospheric Administration (NOAA) Commissioned Officer Corps will be eligible to claim Military Retirement Income and/or Survivor’s Benefits Deduction.Individual Income Tax Rate ChangeIndividual income tax rate is lowered to 3% for tax year 2025.Additional information about Add-backs, Credits, and Deductions is available on our website.MiscellaneousIRC UpdateLine 1 of Form IT-40 assumes conformity with the Internal Revenue Code of 1986, as amended and in effect on Jan. 1, 2023. The 2026 General Assembly is considering what changes to the Internal Revenue Code, if anything, to incorporate into Indiana’s tax laws. If changes occur after you have filed, you may need to file an amended return. You may wish to periodically check DOR’s homepage at www.in.gov/dor for updates.Principal Residence Address RequirementBeginning 2025, individual taxpayers must provide their primary residence address on Schedule CT-40 or Schedule CT-40PNR, if different from their mailing address. NOTE: A new law recently passed which authorizes eligible cities and towns to impose a municipal local income tax beginning tax year 2028. Primary residence address is needed for upcoming implementation.Schedule IN-CR Credit RecaptureABLE 529A Credit, Employer Child Expenditure Credit, and Physician Practice Ownership Tax Credit have been added to the list of credits that can be required to be captured on this schedule. For a summary of tax changes affecting corporations and partnerships, visit DOR’s Business and Corporate Taxes webpage.