Schedule B (IT‑40 PNR), titled “Add‑Backs,” is a supplemental form used by part‑year and full‑year nonresidents filing Indiana Form IT‑40PNR to report certain income and deduction adjustments that must be added back to arrive at the correct Indiana taxable income. When you file as a nonresident or part‑year resident, some items you deducted or treated favorably on your federal return—such as specific taxes, out‑of‑state municipal interest, bonus depreciation, and excess Section 179 expenses—are not fully allowed under Indiana law, so Schedule B gathers these “add‑back” amounts in one place and then feeds the total to line 2 of your IT‑40PNR. The form is short but crucial: it sits behind the main return, ties directly to federal Schedules C, C‑EZ, E, and F where applicable, and provides multiple lines for “other add‑backs” identified by state code numbers so that every required modification to income is clearly listed, totaled, and transferred to the main nonresident return.
Basic Filing Context And When To Use It
If you are filing Form IT‑40PNR as a part‑year Indiana resident or as a full‑year nonresident with Indiana‑source income, you must include Schedule B whenever you have any Indiana add‑backs required by statute or by instructions in the IT‑40PNR booklet. The IT‑40PNR instructions specifically state that any add‑backs shown on Schedule B are carried to line 2 of the main return, making the schedule mandatory if you have these adjustments and unnecessary if all lines remain zero. Always enclose Schedule B with your IT‑40PNR if you enter anything other than zero on any line, and round all dollar amounts to whole dollars as the form directs.
How to Complete Schedule B (IT-40 PNR)
Heading And Identification Area
Before working through the numbered lines, complete the identification section at the top of Schedule B.
- Name(s) Shown On Form IT‑40PNR: Write the same name or names exactly as they appear on the main IT‑40PNR return—this ensures the schedule is matched to the correct taxpayer account.
- Your Social Security Number: Enter the Social Security number of the primary taxpayer from the IT‑40PNR, again matching the main return to help the Indiana Department of Revenue link the forms correctly.
These identifiers should mirror the main return so that, if pages are separated, the department can still tie this add‑back schedule to the proper IT‑40PNR file.
Line 1 – Tax Add‑Back: Certain Taxes Deducted From Federal Schedules C, C‑EZ, E, And/Or F
Line 1 is used to report specific taxes that you deducted as expenses on your federal business or rental schedules but that Indiana requires you to add back.
- Review your federal Schedules C, C‑EZ, E, and F to identify any taxes—such as state or local income taxes—that were taken as deductions from your business, rental, or farming income.
- Determine which of those taxes must be added back under Indiana rules (the IT‑40PNR instructions and add‑back guidance explain which types of state and local taxes must be reversed).
- Add together the applicable amounts and enter the total on line 1 of Schedule B, rounded to the nearest whole dollar, and show “.00” in the cents area if the form pre‑prints that format.
This line ensures that business‑related tax deductions disallowed for Indiana are restored to income.
Line 2 – Out‑Of‑State Municipal Obligation Interest Add‑Back
Line 2 captures interest from certain municipal obligations issued outside Indiana that you excluded or deducted for federal purposes but which do not qualify for exclusion under Indiana law.
- Identify any interest you received from out‑of‑state municipal bonds or similar obligations that was exempt from federal income tax or otherwise not fully taxed federally.
- Determine which portion of that interest Indiana requires you to add back (Indiana generally taxes interest from non‑Indiana municipal obligations unless a specific exemption applies).
- Total the applicable out‑of‑state municipal interest that must be added back and enter this amount on line 2, again rounding to whole dollars.
This line effectively removes the federal tax advantage for municipal interest that Indiana does not treat as exempt.
Line 3 – Bonus Depreciation Add‑Back
Line 3 is used for bonus depreciation add‑backs, reflecting the difference between federal bonus depreciation and Indiana’s treatment of depreciation.
- Review your federal return for any bonus depreciation claimed, typically identified under special depreciation allowances that allow larger first‑year write‑offs of qualified property.
- Determine the amount of bonus depreciation Indiana requires you to add back; the IT‑40PNR instructions and related guidance specify how to compute this difference and how it may be recaptured or adjusted in later years.
- Enter the calculated Indiana bonus depreciation add‑back on line 3, rounded to whole dollars.
This entry aligns your depreciation deduction with Indiana’s rules rather than the more generous federal bonus depreciation allowances.
Line 4 – Section 179 Expense Excess Add‑Back
Line 4 deals with excess Section 179 expense that exceeds what Indiana allows compared to the federal limit.
- Identify the total amount of Section 179 expense you claimed on your federal return for qualifying property, usually from your federal Schedules C, E, F, or other applicable forms.
- Compute the portion that is considered “excess” for Indiana—this is the amount where your federal Section 179 deduction goes beyond Indiana’s permitted limit, as described in the IT‑40PNR instructions.
- Report this Indiana excess Section 179 amount on line 4, again rounded to the nearest dollar.
By adding back the excess Section 179, Indiana ensures that your expense deduction follows state‑specific caps rather than the higher federal limit.
Line 5 – Other Add‑Backs (Lines 5a Through 5o)
Line 5 is broken into multiple lettered sub‑lines (5a through 5o) to capture a variety of additional add‑backs identified by name and code number in the instructions. Each sub‑line follows the same basic pattern: you state the name of the add‑back, enter a code, and then enter the corresponding amount. Indiana provides these code numbers in the IT‑40PNR instructions or related schedules.
For each applicable add‑back, complete the appropriate sub‑line as follows:
- Line 5a – Other Add‑Back A
- In the space provided, write the specific add‑back name (for example, a particular adjustment listed in the instructions) and its designated code number from the Indiana guide.
- Enter the dollar amount of this add‑back on line 5a, rounded to whole dollars.
- Line 5b – Other Add‑Back B
- Enter a second add‑back name and its code number if you have another distinct adjustment.
- Put the corresponding amount on line 5b.
- Line 5c – Other Add‑Back C
- Use this line for a third separate add‑back item, again including both the descriptive name and required code.
- Enter the related amount on line 5c.
- Line 5d – Other Add‑Back D
- List another qualifying add‑back item and its state code.
- Report the dollar figure on line 5d.
- Line 5e – Other Add‑Back E
- Provide the add‑back description and code number.
- Enter the calculated add‑back amount on line 5e.
- Line 5f – Other Add‑Back F
- Use this row for yet another add‑back type, again specifying the name and code.
- Put the related dollar amount on line 5f.
- Line 5g – Other Add‑Back G
- Identify the additional add‑back along with its official code number.
- Enter its amount on line 5g.
- Line 5h – Other Add‑Back H
- Describe the add‑back and list its code.
- Place the dollar total for this adjustment on line 5h.
- Line 5i – Other Add‑Back I
- Note the add‑back’s name and its code number in the spaces provided.
- Enter the associated amount on line 5i.
- Line 5j – Other Add‑Back J
- Record another qualifying add‑back description and code.
- Fill in the dollar amount on line 5j.
- Line 5k – Other Add‑Back K
- Write in the add‑back’s descriptive title and the applicable Indiana code.
- Enter the adjustment amount on line 5k.
- Line 5l – Other Add‑Back L
- Identify the additional add‑back item and its assigned code number.
- Put the corresponding figure on line 5l.
- Line 5m – Other Add‑Back M
- Provide the name and code of another add‑back if needed.
- Enter its amount on line 5m.
- Line 5n – Other Add‑Back N
- List the add‑back description and the related Indiana code number.
- Record the dollar amount on line 5n.
- Line 5o – Other Add‑Back O
- Use this final sub‑line for any remaining add‑back, again giving both name and code.
- Enter the amount on line 5o.
If you do not have enough lines for all your required add‑backs, the IT‑40PNR instructions generally allow attaching additional sheets that follow the same format—description, code, and amount—then incorporating those figures into the total you compute on line 6.
Line 6 – Total Indiana Add‑Backs
Line 6 is where you bring everything together and determine your total Indiana add‑backs.
- Add the amounts from lines 1 through 5, including every sub‑line from 5a through 5o that you used.
- Enter the resulting combined total on line 6, labeled “Total Indiana Add‑Backs,” rounding to whole dollars.
- You must then transfer this same total to Form IT‑40PNR, line 2, as instructed on the form, because that line on the main return uses the Schedule B total to adjust your Indiana taxable income
Once you have completed line 6 and carried the total to IT‑40PNR line 2, check that your name, Social Security number, and all relevant amounts are accurate, and then include Schedule B in your return package as an enclosed schedule with sequence number 02 as printed on the form.