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Ind. Agency Says State Will Tax Unemployment Compensation

By Abraham Gross · May 4, 2021, 6:06 PM EDT

Indiana will not conform to the federal tax code provision offering a tax exclusion for unemployment compensation, the state Department of Revenue said in guidance about federal tax code changes enacted under legislation providing relief for the coronavirus pandemic.

In an updated bulletin issued this week, the department said that the state does not conform to a provision of the American Rescue Plan Act to exclude unemployment compensation, and that any amounts excluded for federal tax purposes must be added back to Indiana adjusted gross income.

The department also updated its February bulletin to note that the state retroactively conforms to a federal deduction for teacher supply expenses related to COVID-19 and requires student loan debt forgiveness to be added back to state adjusted gross income.

Additionally, the state conforms to employer income inclusions for the payroll tax credits related to COBRA changes and sick leave and family leave payments, in addition to exclusions for employer-paid dependent care expenses and various other federal tax provisions, according to the department. 

--Editing by Vincent Sherry. 

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