Schedule CT-40 is the mandatory form used to calculate the specific county income tax you owe as an Indiana resident. Unlike state tax, which is a flat rate for everyone, county tax rates vary depending on where you lived on January 1, 2025. This schedule ensures that your local tax dollars go to the correct county—whether it’s Marion, Lake, Allen, or any of the other 92 counties. It serves as a worksheet where you apply your county’s specific tax rate (found on the back of the form) to your taxable income. Essentially, this form answers the question, “How much do I owe my local government?” and the final result is transferred to your main tax return to be paid along with your state taxes.
How To File Schedule CT-40 (IT-40)?
You must file Schedule CT-40 as an attachment to your Indiana Full-Year Resident Individual Income Tax Return (Form IT-40). It is designated as “Sequence No. 07.” After completing the calculations on this page, you take the final dollar amount and enter it on Line 9 of your Form IT-40. When submitting your tax return, ensure this schedule is included in the stack of documents, as it provides the breakdown of how you arrived at your county tax figure.
How To Complete Schedule CT-40 (IT-40)?
Line 1: Enter Taxable Income
Take the amount from Line 7 of your Form IT-40 (your state taxable income) and enter it here.
- Note: If you and your spouse lived in the same county on January 1, you can combine your income and enter the total in Column A only. You do not need to use Column B.
Line 2: Enter County Tax Rate
Look at the chart on the back of the schedule to find the county where you lived on January 1, 2025. Enter that county’s specific tax rate (e.g., .015, .0202) on this line. If filing jointly and you lived in different counties, enter the spouse’s rate in Column B.
Line 3: Calculate Tax
Multiply your income from Line 1 by the tax rate on Line 2. Enter the result here. This is the basic county tax you owe.
Line 4: Total County Tax
Add the amounts from Line 3A and Line 3B together.
- Most Residents: Enter this total here and also on Line 7 below.
- Perry County Residents: If you lived in Perry County and worked in specific Kentucky counties (Breckinridge, Hancock, or Meade), you must complete Lines 5 and 6 before finishing. Everyone else skips to Line 7.
Line 5: Kentucky Locality Income (Perry County Only)
Enter the amount of your income that was already taxed by a locality in Breckinridge, Hancock, or Meade counties in Kentucky.
Line 6: Credit Calculation (Perry County Only)
Multiply the amount on Line 5 by the Perry County tax rate (find this on the chart). Enter the result here. This credit prevents double taxation for these specific workers.
Line 7: Final County Tax Due
Subtract Line 6 from Line 4 to get your final county tax liability. Enter this result here. Finally, transfer this exact amount to Line 9 of your main Form IT-40.