How to Deduct Ohio Taxes on an Indiana Return
If you are an Indiana resident who lives close to the Ohio border, you may be employed by an Ohio company. In that case, your employer will likely withhold Ohio taxes from your income throughout the year. When it comes time to file your Indiana state tax return, you may be allowed to claim a deduction for your Ohio income by completing and attaching Schedule 2 to your return.
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Instructions
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Obtain the appropriate forms to complete your Indiana tax return. All forms can be downloaded from the Indiana Department of Revenue, or IDR, website (see Resources). Forms may also be obtained at local libraries or by ordering them from the IDR (see Resources). You will need to complete the IT-40 and attach Schedule 2 in to deduct Ohio earnings. You may need additional forms, depending on your specific circumstances.
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Calculate the amount of income that was taxed by Ohio. You may deduct the lesser of the amount you earned in Ohio or $2,000. If you are filing jointly with your spouse and your spouse also had earnings from Ohio, then the limit is doubled, or $4,000.
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Claim the deduction by including the amount on line 8 -- non-Indiana locality earnings deduction -- of Schedule 2.
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Include proof of the deduction. To successfully claim the deduction, you must include evidence that you earned wages in Ohio that were taxed by Ohio. A W-2 should suffice as long as it clearly indicates the amount you earned and that Ohio withheld taxes on your earnings.
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Copy all your forms and mail them to the Indiana Department of Revenue (see Resources).
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Tips & Warnings
Married filing jointly allows you each to take up to a $2,000 deduction, however, it does not raise the amount one spouse alone may claim above the $2,000 limit.
If you claimed an exemption from Ohio taxes when you completed your tax forms for your job, then your Ohio employer did not deduct Ohio taxes and you cannot claim the deduction.
