Taxation in Jay County/State of Indiana
Taxes are part of our lives. Many of us do not like them, but we realize that government services are important to us and our businesses. Indiana and Jay County have a variety of taxes that may impact your business. The following is a synopsis of taxes that may impact your business in the state of Indiana and Jay County, Indiana:
Corporate Income Tax
The Corporate Adjusted Gross Income Tax is calculated at a flat rate of 8.5% (soon to be 6.5%) of adjusted gross income. Adjusted gross income is a company’s federal adjusted income with certain adjustments. This method of determination simplifies tax calculations for corporations and does not apply to S corporations and not-for-profit corporations.
The following is a listing of the adjustments:
- Subtract any income that the federal law or Constitution prohibits Indiana from taxing
- Add deductions allowed for a charitable contributions under federal law
- Add deductions allowed under federal law to state income taxes
- Apportion income to Indiana based on the average percentage of property owned in Indiana, of payroll paid in Indiana and of sales volume attributable to Indiana
- Make an adjustment to disallow the federal bonus depreciation
- Add deduction allowed under Sections 172 and 810 of IRC
- Add amounts attributable to increased Section 179 property tax deduction limits
- Add education allowed for domestic production activities
Sales and Use Tax
Indiana’s Sales and Use Tax is one of the lowest in the Midwest. The tax is calculated at a rate of 7%. In manufacturing the following are exempt from the sales tax: raw materials, equipment, power, electricity, and utilities. Wholesale sales, items used in production, and sales made in interstate commerce are exempt. In addition, the purchase of research and development equipment is exempt from the tax.
Real and personal property tax is assessed at 100% of market value. Tax rates for Jay County and its various jurisdictions are as follows for 2014:
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Research and Development Tax Credit
This credit (also known as the Research Expense Tax Credit) is based on the increase in Indiana Research and Developement over the prior three year base. In the base year, research expenses must have been at least half of the research expenses in the current year. The credit amounts to 1% of qualified research expenses in the first $1 million of investment. Beginning in 2008, the credit increases to 15%. The credit is applied against income tax liability and may be carried forward for 15 years before 2008 and ten years beginning in 2008. There is not a carry back and the credit is non-refundable. This program operates under the Department of Revenue and uses the definition of “qualified research expense” from the internal revenue Code (which includes the costs of wages and supplies).
Patent Income Exemption
Taxpayers are exempt from certain income derived from qualified utility and plant patents. Qualified taxpayers are eligible for an exemption of 50% of patent income for each of the first five years. The exemption percentage decreases over the next five years to 10% in the tenth year. The total amount of exemptions claimed by a taxpayer may not exceed $5 million per year. This benefit is available only to companies with 500 or fewer employees.
Individual Income Taxes
Indiana’s personal income tax is 3.4% of federal adjusted income (with certain exemptions and deductions).
State Unemployment Tax
Maximum Weekly Benefit Amount: $390
Minimum Weekly Benefit Amount: $50
Benefit Duration: 8-26 weeks
Fund Ratio Schedule: A
New Employer Tax Rate: 2.7% (1.0% for Government Employers)
Experienced employer average rate: 1.3%
Taxable Wage Base: $9,500
Note: Indiana has the lowest unemployment compensation rates in the midwest.
State Workers Compensation Rates
Indiana has the second lowest workers compensation rates for manufacturing in the nation.
Other Local Taxes
Jay County has initiated three local income taxes that have an impact on individuals and not on companies. They are as follows:
County Economic Development Income Tax: .25%
County Adjusted Gross Income Tax: 1.00%
Local Option Income Tax: 1.2%