Indiana Corporate Income Tax: Everything You Need to Know
Indiana corporate income tax is charged on the income of corporations and businesses registered or operating in the state of Indiana.3 min read
Indiana corporate income tax is charged on the income of corporations and businesses registered or operating in the state of Indiana. Businesses in Indiana must file an annual tax return. You can deduct business expenses like wages, rent, and costs associated with the sale of goods.
Except for flow-through entities, almost all businesses in Indiana must pay federal and state corporate income taxes. A flow-through entity is one where business income passes through to the owner's personal tax return. Sole proprietorships, partnerships, and S-Corporations are examples of flow-through entities.
C-Corporation is the most common business structure that is subject to corporate taxes. In addition to the corporate income taxes paid by a C-Corporation, the owners, or shareholders, also pay income tax on the distributed income they receive from the company. Thus, profits of a C-Corporation taxed twice.
Since corporate taxes do not apply to flow-through entities like S-Corporations, these businesses are not subject to double taxation. However, the owners must include their share of business income while filing their individual tax returns.
All incorporated businesses in Indiana must file a tax return with the IRS and the state, regardless of whether they are liable for any taxes or not.
Tax Exemptions for Nonprofits in Indiana
Certain nonprofit Indiana entities may qualify for partial or full exemption from paying state and federal income taxes. For example, Indiana exempts certified 501(c) corporations from paying corporate income tax.
These are a few types of 501(c) exempt organizations:
- Educational institutions, including schools, colleges, and research organizations
- Labor unions and workers' organizations
- Religious organizations, including churches, mosques, and synagogues
- Nonprofit recreational organizations and social clubs
- Charities (whether religious or non-religious)
In order to get a tax-exempt status in Indiana, you must first qualify under section 501(c) of the IRC and obtain a tax-exempt identity number from the Internal Revenue Service (IRS). You may also have to submit additional papers at the state level.
IRS Corporate Income Tax Rates
In addition to the state-level corporate tax, Indiana corporations are also liable for federal income tax. Much like the personal tax structure, the federal corporate tax also has a bracketed structure.
However, unlike personal income tax slabs, the federal tax slabs do not have completely progressive rates, meaning that the tax rates do not increase with the income level in all the slabs. Moreover, contrary to the yearly changes in personal income tax brackets, corporate tax brackets stay same for a long period of time.
These are the current corporate tax rates:
- Between $0 and $50,000: 15 percent
- Between $50,000 and $75,000: 25 percent
- Between $75,000 and $100,000: 34 percent
- Between $100,000 and $335,000: 39 percent
- Between $335,000 and $10,000,000: 34 percent
- Between $10,000,000 and $15,000,000: 35 percent
- Between $15,000,000 and $18,333,333: 38 percent
- Over $18,333,333: 35 percent
Indiana Business Income Tax Extensions
You must file your business's tax return in Indiana by April 15. However, you can get an extension for Indiana business income tax in either of the following two ways:
- Get a six-month business extension from the IRS, and you will be automatically entitled to an Indiana tax extension without having to file a separate request. Your Indiana tax return deadline will be 30 days after the IRS extension deadline.
- If you don't have an IRS tax extension, or if you need a longer extension than the automatic extension of six months, you must make a request in writing to the Indiana Tax Administration Division before the filing deadline. The extension application must explain why you need the extension and the length of the requested extension. The tax authority will notify you of its decision to approve or reject the extension.
You should mail the application for Indiana business extension to the following address:
Indiana Department of Revenue
Tax Administration Division
100 N. Senate Avenue
Indianapolis, IN 46204-2253
Note that an extension for filing a return is not an extension of time to pay your taxes. You must pay the taxes within the original deadline in order to avoid interest and penalties. If you have paid 90 percent of your business tax on time, obtaining an extension of filing time prevents you from penalty during the period of extension.
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