Credits and breaks for Indiana families: $2,500 a child, 10% of the EITC, and the 529 credit

Indiana does not have a child tax credit or a child and dependent care credit. What it has instead is a set of fixed exemptions: $1,000 for each dependent plus $1,500 more for each dependent child under 19, so each child takes $2,500 off Indiana income, worth about $110 to $125 a year at the combined state and county rate. Around that sit a few things worth more. The Indiana earned income credit pays 10% of the federal credit, refundable, to anyone who claimed the federal one. The Indiana529 credit returns 20 cents on every dollar put into the state’s 529 plan, up to $1,500 a year, and the money can be spent on Indiana K-12 tuition as well as college. A renter gets up to $3,000 off income; a parent with a child in private school or homeschooled gets $1,000 per child; an adopting family gets a credit of up to $2,500 per child. For most families the single most useful move is to run college or private school tuition through an Indiana529 account.

All of it rides on a return that starts from federal adjusted gross income and taxes what is left at 2.95% plus the county rate, which runs from 0.5% to 3.0% depending on where the family lived on January 1. A family in Marion County pays 4.97% combined, so each $1,000 of deduction or exemption is worth about $50 there, and a dollar of credit is worth a dollar everywhere. That is why the credits matter more than the exemptions.

The exemptions for children

Schedule 3 lists them. Each dependent claimed on the federal return earns $1,000. Each dependent child earns $1,500 more if the child is under 19 at year end, or under 24 and a full-time student, and is your son, daughter, stepchild, foster child or a child you are the legal guardian of. In the first year a child is claimed, the extra is $3,000 instead of $1,500, so a baby born in 2026 is worth $4,000 of exemptions that year and $2,500 in the years after. An adopted child earns a further $3,000 on top. The dependent details go on Schedule IN-DEP, which asks for each child’s name, Social Security number and relationship.

None of these figures are indexed; they have been the same for years. There is no income limit and no phase-out, so a family with $300,000 of income gets the same $2,500 per child as a family with $30,000.

Indiana uses the filing status from the federal return and has no separate head-of-household break: a single parent and a single person without children each get the $1,000 personal exemption, and the children carry the value. The one place status matters is the renter’s and homeowner’s deductions, which are halved for married filing separately.

The Indiana earned income credit

Indiana’s EITC is 10% of the federal earned income credit, figured on Schedule IN-EIC and claimed on Schedule 5. It is refundable: if it is more than the tax, the difference comes back as a refund. To get it you must have been eligible for and claimed the federal credit, you must have been an Indiana resident or had Indiana-source income during the year, and your income on IT-40 line 1 must be under the federal maximum AGI for the credit, which was $68,675 for 2025; the 2026 figure is to come. Each child claimed needs a valid Social Security number. A family whose federal credit is $6,000 gets $600 from Indiana; a childless worker whose federal credit is $600 gets $60. If you do not know your federal credit by the Indiana due date, the Department says to file without it and amend later. The federal side, who qualifies and how it is figured, is in The earned income credit.

The Indiana529 credit

This is the break to plan around. Contributions to an Indiana529 account (the plan formerly called CollegeChoice) earn a credit of 20% of the amount contributed, up to $1,500 a year, or $750 married filing separately. The credit is claimed on Schedule IN-529 and Schedule 6. Four features make it unusually good:

• It is a credit, not a deduction. A $5,000 contribution returns $1,000 of tax, not $250.
• Anyone who contributes can claim it. The account owner need not be the contributor. A grandparent, an aunt or a family friend who puts money into a child’s account claims the credit on their own Indiana return.
• K-12 tuition counts. Withdrawals for tuition at an Indiana elementary or secondary public, private or religious school are qualified, so a family already paying private school tuition can route it through the account and collect 20% back on the way in, up to the cap.
• There is no income limit.

The limits: the credit cannot exceed the state tax on IT-40 line 8, so a family with very little tax cannot use all of it; unused credit does not carry forward; and money transferred in from another state’s 529 plan does not count. A nonqualified withdrawal can require paying back credits claimed earlier. The $1,500 cap is reached at $7,500 of contributions a year, and that is the right target for a family that can manage it: $7,500 in, $1,500 back, every year.

Private school, homeschool and other education breaks

A parent whose dependent child attends a nonpublic school or is homeschooled deducts $1,000 per child on Schedule 2, line 8. The child must be eligible for a free public education in Indiana and must be your natural or adopted child or a court-appointed ward. There is no receipt requirement for a dollar amount; the deduction is a flat $1,000 whether tuition was $500 or $15,000. Distributions from an Indiana Education Scholarship Account or Career Scholarship Account are deductible as well. Indiana has no tuition deduction and no credit for college tuition or student loan interest beyond what flows through federal AGI; the 529 credit is the college break. A public school teacher, librarian, counselor or principal gets a credit of up to $100 for classroom expenses, $200 on a joint return if both spouses qualify. A gift to an Indiana college earns a credit of half the gift, up to $100 ($200 joint), on Form CC-40, and a gift to a scholarship-granting organization earns a 50% credit with no cap on the gift.

Adoption

An Indiana resident who claims the federal adoption credit gets an Indiana credit of 20% of the federal credit, up to $2,500 per child, and anything beyond the tax owed is refunded. A part-year resident’s credit is prorated by the days spent in Indiana. Together with the $3,000 additional exemption for an adopted child, Indiana treats adoption more generously than anything else in the family code.

Rent, the house, and the things that are missing

A family that rents deducts up to $3,000 of rent on its principal residence ($1,500 married filing separately); a family that owns deducts up to $2,500 of property tax paid. Both are on Schedule 2, and the rent one is the deduction most often missed, because the federal return never asks. The landlord’s name and address go on the schedule.

What is not here: there is no Indiana child tax credit, no child and dependent care credit, and no deduction for day care; the federal credit for child care does not reach the state return, and Indiana offers nothing in its place. There is no deduction for medical expenses or charitable gifts. Federal above-the-line items do flow through, so a dependent care flexible spending account at work, which cuts federal wages, cuts Indiana income too, and is the only child care break Indiana effectively honors. The same is true of 401(k) deferrals, HSA contributions and IRA deductions.