Frequently Asked Questions (FAQs)

Employee Expense Credit/Employee Wage Deduction

Employment Expense Credit

What is it?
Zone employers can earn tax credits for employing zone residents. Credit is subtracted from business state tax liability based on wages paid to employees who live in the zone and work at least 50% of the time in the zone on a job related at least 90% of the time to the zone facility. If a "C" corporation, file as noted below. All other businesses may only take this credit on employees hired January 1, 1999 or later. (*Base year wages for these employees are zero.) *Contact LUEA for details.

How to claim it?
Annual employment expense tax credit is the lessor of $1,500 multiplied by the number of qualified employees or 10% of the increase in wages paid to qualified employees in the tax year compared to the 12 months preceding February 1, 1993. Subtract the SMALLER amount from your tax liability on Form IT-20, and attach Schedule EZ, Part II. Qualified employees must be issued a Form IT-40 QEC (Enterprise Zone Qualified Employee Certificate).

Special eligibility note:
If a "C" or "SC" corporation, file as noted above. All other businesses may only take this credit on employees hired January 1, 1999 or later. Base year wages for these employees are zero.

*LUEA offers a poster for your business to inform your employees of the Employee Wage Deduction, if you would like to request a poster(s), please contact LUEA.

Employee Wage Deduction

What is it?
Qualified employees who live and work in the zone at least 50% of the time and 90% of the job is related to the zone business, government, or non-profit are entitled to a state tax deduction. Employees may deduct one half (1/2) of their income earned, up to $7,500, whichever is less. At the current tax rate this could be up to $255. Wages up to $15,000 annually receive the benefit. This tax deduction is available for not-for-profit and government agencies located in the zone.

Because businesses receive benefits from employing zone residents, zone residents should benefit from increased employment opportunities. Residents should also receive indirect benefits from the incentives received by individuals and businesses. Since all tax savings must be reinvested in the zone business or the zone community, residents will benefit from an enhanced quality of life.

How to claim it?
Attach Form IT-40 QEC from your employer to your tax return and enter amount as "Other Indiana Deduction," Line F.

Special eligibility note
Zone resident employees of all enterprise zone businesses, government, and non-profits are eligible.  File as noted above. Zone residents claiming this benefit do not pay registration fees.