Schedule C (IT‑40 PNR), titled “Deductions,” is a companion form used by part‑year and full‑year nonresidents filing Indiana Form IT‑40PNR to claim specific Indiana deductions that reduce Indiana adjusted gross income. This one‑page schedule lists key state‑level deductions such as the renter’s deduction, homeowner’s residential property tax deduction, state tax refund adjustment, interest on U.S. government obligations, taxable Social Security and railroad retirement benefits adjustments, an active military service deduction, a private school/homeschool deduction per qualifying child, an Indiana net operating loss deduction, an exclusion for the nontaxable portion of unemployment compensation, and several “other deductions” identified by name and code; when you add them together on Schedule C and carry the total to line 4 of the IT‑40PNR, they collectively reduce the portion of your income that is subject to Indiana tax for the year. The form is labeled as an enclosure with sequence number 03, must show the same name(s) and Social Security number as your main IT‑40PNR, and requires you to round all entries to whole dollars, which keeps your nonresident return consistent, organized, and clearly documented for the Indiana Department of Revenue.
How to Complete Schedule C (IT-40 PNR)
Heading And Identification Area
Before filling in any deduction lines, complete the header so the schedule links correctly to your return.
- Name(s) Shown On Form IT‑40PNR
Enter your name or names exactly as they appear on the front of your IT‑40PNR. This ensures Schedule C stays matched to the correct taxpayer file. - Your Social Security Number
Write the primary taxpayer’s Social Security number just as it appears on the IT‑40PNR. This identifier ties the deduction schedule back to your main nonresident return.
Remember the note at the bottom of the form: you must round all entries, so report dollars only and drop cents when you complete the numbered lines.
Line 1 – Renter’s Deduction
Line 1 is for the Indiana renter’s deduction.
- In the space provided, enter the Indiana address of the property you rented if it is different from the address on the front page of your IT‑40PNR.
- Enter your landlord’s name and address in the fields shown, giving enough detail to identify the property owner or management company.
- Fill in the number of months during the year that you rented this Indiana residence.
- In the box labeled “Amount of rent paid,” enter the total rent you actually paid for that Indiana home during the tax year, rounded to whole dollars.
- On the line 1 amount field, enter the smaller of:
- 3,000 dollars (or 1,500 dollars if you are married filing separately), or
- The total rent you paid that you just calculated.
This line gives you a renter’s deduction limited by both the rent you paid and the maximum allowed for your filing status.
Line 2 – Homeowner’s Residential Property Tax Deduction
Line 2 is for homeowners who qualify for Indiana’s residential property tax deduction.
- Enter the address of the property on which you paid Indiana residential property tax if it is different from the one on the front of your IT‑40PNR.
- Fill in the number of months you lived in that property during the year.
- In the “Amount of property tax paid” box, enter the total amount of Indiana property tax you actually paid on that residence during the tax year, rounded to whole dollars.
- On the line 2 amount field, enter the lesser of:
- 2,500 dollars (or 1,250 dollars if you are married filing separately), or
- The Indiana property tax amount you paid on your qualifying home.
This line lets you claim a deduction based on Indiana residential property taxes, capped according to your filing status.
Line 3 – State Tax Refund Reported On Federal Return
Line 3 adjusts for certain state tax refunds you included in your federal income.
- Look at your federal return and identify the state tax refund amount that you reported as taxable income for federal purposes.
- Enter that applicable refund amount on line 3, rounded to whole dollars, if it qualifies for this Indiana deduction under the IT‑40PNR instructions.
This line allows Indiana to reduce your income by eligible state tax refunds that were taxed federally but are deductible here.
Line 4 – Interest On U.S. Government Obligations
Line 4 is for qualifying interest from U.S. government obligations.
- Determine how much interest from U.S. government obligations (such as specific federal bonds) you received during the year that may be deductible for Indiana.
- Enter the qualifying amount on line 4, rounded to the nearest dollar, following the guidance in the IT‑40PNR instructions about which federal obligations qualify.
This line reflects Indiana’s special treatment of certain federal obligation interest.
Line 5 – Taxable Social Security Benefits
Line 5 adjusts taxable Social Security benefits.
- Check your federal return to find the amount of taxable Social Security benefits you reported federally.
- Enter the portion that qualifies for the Indiana deduction on line 5, rounded to whole dollars as allowed by the state instructions.
This line is used to subtract eligible Social Security benefits from your Indiana income base.
Line 6 – Taxable Railroad Retirement Benefits
Line 6 is for taxable railroad retirement benefits.
- From your federal return, determine the amount of taxable railroad retirement benefits you included in federal income.
- Enter the deductible portion of that amount on line 6, using whole dollars, as directed by the Indiana rules for railroad retirement benefits.
Indiana often allows favorable treatment of certain railroad retirement income, and this line captures that deduction.
Line 7 – Active Military Service Deduction
Line 7 provides a deduction for qualifying active military service.
- Review your records for active duty military income that meets Indiana’s requirements for this deduction.
- Enter the allowed deduction amount for that active military service on line 7, rounded to the nearest dollar according to the IT‑40PNR instructions.
This line recognizes income from active military service that Indiana permits you to deduct.
Line 8 – Private School/Homeschool Deduction
Line 8 is for the private school or homeschool deduction.
- Count each qualifying child for whom you incurred eligible private school or homeschool expenses, as defined in the instructions.
- Multiply the number of qualifying children by 1,000 dollars per child.
- Enter the resulting total on line 8, rounded to whole dollars.
This deduction helps offset certain educational costs for qualifying children in private or homeschool settings.
Line 9 – Indiana Net Operating Loss Deduction
Line 9 is for the Indiana net operating loss (NOL) deduction.
- Using your Indiana NOL records and any worksheets specified in the IT‑40PNR instructions, determine the allowable Indiana net operating loss deduction for the year.
- Enter this calculated Indiana NOL amount on line 9, in whole dollars.
This line lets you apply eligible state‑level NOL carryovers or carrybacks against current Indiana income.
Line 10 – Nontaxable Portion Of Unemployment Compensation
Line 10 adjusts for the nontaxable portion of unemployment compensation.
- Complete the Unemployment Compensation Worksheet referenced in the instructions to determine the portion of your unemployment compensation that is treated as nontaxable for Indiana purposes.
- Enter that nontaxable portion on line 10, rounded to the nearest dollar.
This line reduces your Indiana income by the part of unemployment compensation that qualifies as nontaxable under Indiana law.
Line 11 – Other Deductions (Lines 11a, 11b, 11c)
Line 11 gives you space to list additional deductions that do not fit on the earlier lines but are allowed by Indiana, using specific names and code numbers from the instructions.
For each of the three sub‑lines, follow the same pattern:
- Line 11a – Other Deduction A
- In the “Enter deduction name” space, write the specific deduction name as described in the IT‑40PNR instructions, and fill in the corresponding code number in the box labeled “code no.”.
- Enter the dollar amount of that deduction on line 11a, rounded to whole dollars.
- Line 11b – Other Deduction B
- Provide another qualifying deduction name and its associated code number if you have a second separate deduction.
- Enter the amount for this second deduction on line 11b.
- Line 11c – Other Deduction C
- For a third deduction, write its name and the proper code number.
- Enter the related deduction amount on line 11c, rounded to whole dollars.
If you have more than three “other deductions,” attach additional sheets using the same format—deduction name, code number, and amount—then be sure to include those amounts in your total on line 12.
Line 12 – Total Deductions And Transfer To IT-40PNR
Line 12 is the final step where you total all deductions from Schedule C and move the figure to your main nonresident return.
- Add together the amounts from lines 1 through 11, including all entries on 11a, 11b, and 11c and any attached “other deduction” sheets, if used.
- Enter this combined sum on line 12, which is labeled “Total Deductions,” rounding to whole dollars.
- Take the same total from line 12 and enter it on line 4 of Form IT‑40PNR, as the form instructs, so your Indiana deductions are reflected in your overall nonresident tax calculation.
Once line 12 is complete and the amount has been transferred to the IT‑40PNR, review Schedule C to confirm that your name, Social Security number, and all deduction entries are accurate, then include it as Enclosure Sequence No. 03 with your Indiana nonresident return for 2026.