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Occasionally
people ask me about the name of this column, with gentle comments like,
“Are you nuts? What’s fun about taxes?” or “I heard about someone
who had fun with his taxes once, and it landed him in jail!”
You
may not rank taxes at the very top of your list of fun things, like bunji
jumping and tackle basketball, but after you read today’s column, you
might at least start thinking of taxes as interesting.
While
our Senators and Congress-people in Washington sputter and complain about
Clinton’s impending veto of their big tax reduction bill, Indiana
legislators have proven they can get the job done. Although it’s a
little early to start preparing your 1999 income tax returns, it’s not
to early to start planning on how you can spend the extra money you’ll
be getting back from the State of Indiana in the spring. In case you
haven’t heard, here’s what Indiana legislators did for the individual
income taxpayers of Indiana this year:
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Dependent
children under the age of 19 (or full-time students under the age of
24), who, for the past two years, qualified for a special $500 Indiana
exemption (in addition to the regular $1,000 exemption for each
dependent), now qualify for an additional $1,000 exemption. This means
you will reduce your Indiana Adjusted Gross Income by a total
exemption of $2,500 for each qualifying child.
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Elderly
taxpayers (age 65 or older) are entitled to an additional exemption of
$500 (in addition to the existing $1,000 exemption for the elderly and
the regular $1,000 exemption for each taxpayer and dependent) if their
federal adjusted gross income is less than $40,000. This means as an
elderly taxpayer you will reduce your Indiana Adjusted Gross Income
with $2,500 worth of exemptions if your income is lower than $40,000
($1,500 if your income is $40,000 or higher). This amount will double
for a married couple where both spouses are elderly.
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Renters
who previously were entitled to a deduction of $1,500 for rent paid to
an Indiana landlord, are now entitled to a deduction of the lower of
$2,000 or the actual amount paid. This deduction is taken on Schedule
1 of the IT-40 or on the back of the IT-40EZ.
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Homeowners
are entitled to a residential property tax deduction of up to $2,500
on their principal residence. If you paid real estate tax on your
principal residence during 1999, you can reduce your Indiana Adjusted
Gross Income by the amount of real estate tax you paid, up to a
maximum of $2,500. Take this new deduction on Schedule 1 of the IT-40.
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Business
owners, partners, and shareholders who previously had to add back
property tax deducted on their federal tax return, are no longer
subject to this provision. For example, a person filing a Federal
Schedule C for a home-based business, who takes a deduction for
office-in-the-home and automobile expenses, previously had to add back
the real estate taxes and automobile excise taxes deducted on the
federal return for Indiana tax purposes. This no longer needs to be
done.
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Indiana
taxpayers expecting a refund (which will probably include a majority
of taxpayers in the Spring of 2000 due to these sweeping changes) may
request a direct deposit to their bank account. This should speed up
the refund process in Indiana, as it has for federal income tax
refunds.
These
changes are all effective for 1999 taxes, so you will notice the reduced
taxes when you prepare your return next April. Most taxpayers will be
affected by at least one of the above provisions, and some taxpayers will
benefit from several of these changes.
For
the year 2000 and in future years, if you prefer to have less money
withheld from your Indiana taxes because of the new dependent and elderly
exemptions, instead of waiting until April for a refund, you can file a
revised Form WH-4 with your employer.
Now
who says taxes aren’t fun?
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