All Roll Calls
Yes: 307 • No: 252
IndianaSB 243Second Regular Session 124th General Assembly (2026)SenateWALLET
Various tax matters.
Sponsored By: Travis Holdman (Republican)
Signed by Governor
tax and fiscal policythe houseways and means
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Bill Overview
Analyzed Economic Effects
39 provisions identified: 14 benefits, 9 costs, 16 mixed.
2026 deduction for car loan interest
For tax year 2026, Indiana lets you deduct the qualified passenger vehicle loan interest you deducted federally under IRC Section 163(h)(4). You must be an Indiana resident when the interest is paid or accrued. Estates and trusts cannot take this deduction. For joint returns, the spouse treated as paying the interest claims it.
2026 tax break for overtime
For tax year 2026, you can deduct on your Indiana return the qualified overtime you deducted on your federal return under IRC Section 225. If only some overtime is in Indiana income, your deduction is prorated. This rule applies only for the 2026 tax year.
2026 tax break for tips
For tax year 2026, you can deduct on your Indiana return the qualified tips you deducted on your federal return under IRC Section 224. If only some of your tips are in Indiana income, your Indiana deduction is prorated. This rule applies only for the 2026 tax year.
Bigger child tax refunds for families
If you qualify for the federal child tax credit, Indiana gives you a state credit too. The credit equals the smaller of 20% of your federal credit or $2,500 per eligible child. It is refundable if it is more than your Indiana tax. Part‑year residents get a prorated amount based on days in Indiana. Joint filers use combined resident days for the proration.
No cigarette tax on exports, U.S. sales
Beginning July 1, 2026, cigarette tax does not apply to sales to the U.S. government or to cigarettes shipped out of Indiana and not coming back. Distributors do not need to stamp those packages. Sales inside Indiana to people or private stores on federal land are still taxable. Distributors must keep proof the sale or shipment qualified.
Pass-through entity credits and refunds
Beginning January 1, 2025, electing pass‑through entities must compute and report each owner’s share of the entity tax. Each direct owner gets a refundable credit equal to the amount credited to them. An electing entity can claim credits for taxes withheld or paid on its behalf. It may also elect on its original return to take pass‑through credits itself for all owners, and to claim a credit for resident owners’ income taxed by another state if that state offers a similar credit. Elections must be on the original return and follow the law’s limits.
Personal liability for trust taxes
If you are a responsible person who must remit trust taxes (like sales tax or withholding), you are personally liable for the tax, plus penalties and interest. Knowingly failing to collect or remit is a Level 6 felony. The business and responsible persons are jointly and severally liable. The law also defines who can be a responsible person and lists which taxes are held in trust. It expands who counts as a “person” under this chapter.
New rules for research write-offs
For tax years starting after 2021, Indiana changes how Section 174 research costs affect state income. You must deduct some capitalized research costs and add back others when figuring Indiana AGI. If you own a share of a partnership or corporation, your deduction cannot exceed your adjusted basis plus earlier Section 174 deductions. Amounts you cannot deduct carry forward to future years and are limited by passive‑activity rules.
New path to clear tax warrants
Starting July 1, 2026, you can ask the department to expunge or release a tax warrant. Possible reasons include five years of timely filing and payment, warrants older than 10 years, no pending cases, and resolved debts. The department must issue a written decision and can notify credit bureaus at your request. The department also files warrants electronically, and sheriffs enforce them only against your property in the county where the warrant is filed.
Felony for fake cigarette stamps
Starting July 1, 2026, it is a Level 5 felony to knowingly sell, offer, or affix a counterfeit cigarette tax stamp. This targets stamp fraud to protect lawful sellers and state tax revenue.
Limited‑time tax amnesty program
The department runs a tax amnesty for listed taxes due for periods ending before January 1, 2024. The payment window lasts up to eight business weeks and ends no later than January 1, 2027. If you pay in full or enter an approved payment plan and waive interest and penalties, the department removes interest and penalties, releases liens, and stops civil or criminal action for those periods. Money collected is sent out the same way regular receipts for those taxes are distributed.
More time for partnership audits
For federal changes after December 31, 2025, partnerships and some tiered partners have up to one year to respond to adjustments. The tax department generally has one year after receiving the federal results to issue proposed partnership adjustments. In tiered structures, some deadlines add 30 days per tier. Special handling applies if the adjustment is reported under federal Section 6226.
Crackdown on out‑of‑state titling
Effective July 1, 2023, the department presumes some interstate vehicle, aircraft, or boat deals were meant to avoid Indiana sales or use tax. This includes purchases through out‑of‑state closely held businesses with Indiana owners, or titling in states without a sales tax. The department can investigate and bill tax based on the purchase date. Starting after June 30, 2026, it may add a $500 penalty to the Indiana resident. You can rebut the presumption with proof like the primary insurance address or permanent storage outside Indiana.
Longer audit window for big errors
For returns filed on or after January 1, 2026, if you understate income by at least 25%, the department has six years to assess, not three. This applies to Indiana income taxes and certain related taxes.
Stricter motor carrier registration checks
The Department can deny a motor carrier registration if the applicant or an affiliated person has revoked registrations, unfiled returns, unpaid taxes or fees, unreturned plates, an unsatisfactory federal safety rating, or repeated violations. This also applies when a related owner, officer, or shareholder operates or controls the business. The state can bill for altered cab cards or permits. This authority applies now.
Tougher rules for cigarette distributors
Starting July 1, 2026, cigarette distributors must send a detailed invoice with every shipment and keep a duplicate for inspection. Retailers must keep each shipment’s invoice for at least two weeks and can request a copy. The Department of Revenue can suspend or revoke a distributor’s registration after 15 days’ written notice for violations. The distributor can ask for a hearing and court review, but no registration fee is refunded if the certificate is suspended or revoked.
New petroleum severance tax and rules
Beginning July 1, 2026, Indiana charges a petroleum severance tax equal to the highest of 1% of value, $0.03 per 1,000 cubic feet of gas, or $0.24 per barrel of oil. The law defines producers, owners, purchasers, and petroleum gatherers and requires monthly reporting on department forms. The tax is a lien from severance, and buyers of untaxed product are personally liable until it is paid. You may apply for a severance tax refund if you overpaid. An older purchaser‑liability section is repealed and replaced by these rules.
Quarterly corporate estimated tax payments
From July 1, 2026, corporations that owe more than $2,500 in AGI tax must pay estimated tax quarterly, each equal to 25% of the year’s estimate. Calendar‑year payments are due April 20, June 20, September 20, and December 20. If a quarter’s estimated liability is over $5,000, you must pay by electronic funds transfer or a guaranteed instrument.
Stronger tax collection fees and limits
Starting July 1, 2026, when a tax warrant is issued, a one‑time collection fee equal to 10% of the unpaid tax is added, plus interest, penalties, and costs. The Department can extend older county warrants statewide by filing or amending after June 30, 2026 (through July 1, 2029). The Department cannot issue a demand notice more than nine years after it was first allowed to do so. An extra penalty applies to listed tax debts that were eligible for amnesty but remain unpaid, with exceptions for timely appeals with injunctions, valid payment holds, certain prior payment plans, lack of notice, and liabilities that are only penalties or penalties over 100% of eligible tax.
Vehicle and boat sales tax timing
The sales tax rule for vehicles, aircraft, cargo trailers, and watercraft applies to transactions after June 30, 2023. A sale counts as after that date if delivery to you or the named place happens after June 30, 2023. If your agreement and payment happened before July 1, 2023, that portion counts as before that date. This rule is retroactive to July 1, 2023 and runs through July 1, 2029.
Alcohol taxes and reporting overhauled
Beginning July 1, 2026, beer is taxed at $0.115 per gallon, and wholesalers can get refunds for tax‑paid beer shipped out of state. Liquor and wine of 21% alcohol or more are taxed at $2.68 per gallon. Sales delivered outside Indiana and wine sold to clergy for sacramental use are tax‑exempt. Sellers must keep duplicate delivery invoices for two years and get a 1.5% discount for accurate, on‑time excise payments. A sale is counted when goods leave the seller’s custody, and there is no floor stock tax on goods already in stock. If untaxed alcoholic beverages are on your premises, you owe the tax and face penalties (100% for fraud, or 10% for mistakes).
Marketplace tax safe harbor and buyer liability
For calendar years after December 31, 2021, an online marketplace can avoid liability for uncollected Indiana sales/use tax if it has systems to get accurate seller data, the miss was due to seller‑provided errors, and it gives purchaser details for each untaxed sale. The safe harbor does not apply if the facilitator and seller are affiliated. When the facilitator is relieved, the purchaser owes the unpaid tax.
Production property depreciation and dates
Starting July 4, 2025, if you take the federal special depreciation for qualified production property, you must adjust Indiana income as if you did not take that federal election. If federal depreciation is later recaptured, Indiana treats it like a sale and reports the income or gain. Indiana also applies certain income rules to tax years ending after July 4, 2025, and counts qualified production property placed in service after that date.
Rules for buying most business assets
If you buy more than half of a business’s tangible personal property, you or the seller must notify the Department at least 45 days before you take the assets or pay. If you do not give notice, you can be held liable up to the purchase price for the seller’s unpaid taxes, interest, and penalties. If you give notice, the Department has 20 days to send a summary or a tax clearance letter, and you are generally protected if you follow any withholding instructions.
Severance tax records, payback, and crimes
Starting July 1, 2026, anyone paying the petroleum severance tax is entitled to immediate reimbursement from the owner and may deduct the payment from amounts due. Taxpayers must keep books and records for three years; not keeping them is a Class C infraction, and false entries with intent to defraud are a Class B misdemeanor. A trustee who intentionally keeps severance‑tax amounts and does not remit them commits a Level 6 felony.
Bank and partner income tax changes
Starting July 4, 2025, Indiana changes how adjusted gross income is calculated for financial institutions and some partners, listing items to add back or subtract. Beginning July 1, 2026, a quarterly estimated payment avoids penalty if it is at least 20% of this year’s final tax or 25% of last year’s final tax. Short‑year and withholding rules apply as specified.
Cash sales tax rounds to nickels
Beginning January 1, 2027, if you pay state or local tax in cash, the tax rounds down to the next $0.05. Any tax under $0.05 rounds down to $0.00. Tax is first calculated on the full transaction before rounding. The rounding rules apply across state and local cash taxes.
Less tax withheld on small winnings
Starting January 1, 2026, Indiana withholds state tax on gambling wins only when the prize is $2,000 or more. This applies to slot machines, keno, and lottery or prize payouts. Beginning in 2027, these dollar triggers rise if the federal reporting amount increases for inflation.
Retail tax base excludes compliance amounts
Beginning January 1, 2027, amounts you add or subtract only to follow IC 23‑15‑13 do not count in gross retail income. This lowers the base used to compute sales tax for those compliance‑only adjustments.
Choose electronic tax notices and filing
The department may send required mail by first‑class, certified, registered, certificate of mailing, or electronically. If you have an online account or give written consent, the department can deliver documents electronically. The commissioner may also allow electronic filing of returns and documents. Electronic delivery must meet security and E‑SIGN rules.
New rules for estimated taxes
Starting July 1, 2026, Indiana follows federal timing rules for individual estimated payments. You do not need to file a declaration if you expect under $1,000 of Indiana tax. You must split each estimated payment into state and local parts as the department directs.
Clearer criminal tag for tax crimes
The law adds a clear criminal‑code link stating that a named tax rule defines a crime. This makes it clearer when certain tax acts are criminal. It takes effect immediately.
Cash purchases rounded to nearest nickel
Beginning January 1, 2027, cash purchases are rounded to the nearest five cents. The total includes sales tax and other government charges. Cents ending in 1, 2, 6, or 7 round down; 3, 4, 8, or 9 round up. Amounts under $0.05 can round to $0.00 or $0.05. If you agreed and paid before January 1, 2027, that paid part follows the old rules even if delivery is later.
More time after IRS changes
Beginning January 1, 2026, if the IRS changes your return after December 31, 2025, you have one year to notify Indiana and file any amended state returns. After you file that notice, the Department has one year to issue a proposed assessment tied to that change. The new final adjustment and refund rules also apply to changes the Department receives after December 31, 2025.
Refund window and nonresident filing rules
Starting January 1, 2026, most refund claims must be filed within three years after the later of the return due date or the payment date. Extra time applies in certain cases, such as IRS changes and agreed extensions. A nonresident is treated as having filed if they had no Indiana‑source income (or only distributive share income), were not a resident, did not ask to reduce withholding, and all pass‑throughs filed composite returns that include them. The Department may disclose listed‑tax information to some individuals authorized through its online system before September 8, 2020, until a cutoff the Department set by September 1, 2023, unless you object.
Alcohol excise rates and one‑time tax
Starting July 1, 2026, wine is taxed at $0.47 per gallon and hard cider at $0.115 per gallon. Drinks under 21% alcohol, and some mixed drinks 15% or less bottled by a manufacturer, are taxed as wine. Alcohol is taxed only once, at the first sale or withdrawal, and the law names who must pay. Filers can deduct exempt sales, damaged or destroyed product, and returns with records; refunds are issued if deductions exceed tax. Sales for export and to the U.S. government are exempt, but sales to individuals on federal land are not. Agencies may gauge and set rules to assess and collect these taxes.
Cigarette distributor reporting and stamps
Starting July 1, 2026, registered cigarette distributors must keep full books and invoices for three years. Monthly returns are due by the 15th, and interstate sales and drop‑shipments must be reported on set monthly deadlines. The state provides free replacement stamps if a stamp did not show a taxable sale, and unused stamps may be refunded. Distributors cannot transfer stamps without written approval, and no loose stamps may accompany sales between distributors.
More officials may see tax data
The department may share confidential taxpayer information for official use with the governor, a designee, certain legislators or staff acting for a taxpayer in their district, and legislative services staff. Recipients must keep the information confidential and use it only for official work.
Alcohol tax funding and enforcement updates
Beginning July 1, 2026, the state sets new rules for alcohol tax money and enforcement. Counties, cities, and towns get excise fund payments twice a year (June 1 and December 1), split by the annual alcohol license fees paid for locations in their area. The state must make up any year‑end shortfall in those local payments within one month. Money to run and enforce the alcohol law is appropriated each year, and unspent enforcement funds carry forward for that use. The Attorney General must act to collect unpaid alcohol fees and taxes. The law also repeals the old authority to create a single, unified excise‑tax reporting system.
Sponsors & Cosponsors
Sponsor
Travis Holdman
Republican • Senate
Cosponsors
Craig Snow
Republican • House
Dan Dernulc
Republican • Senate
Jeffrey Thompson
Republican • House
Linda Rogers
Republican • Senate
Ron Alting
Republican • Senate
Scott Baldwin
Republican • Senate
Roll Call Votes
Senate vote • 2/25/2026
Roll Call 285 on SB0243.04.ENGH.CON01
Yes: 47 • No: 0 • Other: 2
House vote • 2/23/2026
Roll Call 310 on SB0243.03.COMH
Yes: 78 • No: 18
House vote • 2/19/2026
Roll Call 289 on SB0243.03.COMH.AMH002
Yes: 31 • No: 63 • Other: 1
House vote • 2/19/2026
Roll Call 288 on SB0243.03.COMH.AMH003
Yes: 35 • No: 58 • Other: 2
House vote • 2/19/2026
Roll Call 287 on SB0243.03.COMH.AMH001
Yes: 38 • No: 56 • Other: 1
Senate vote • 1/28/2026
Roll Call 122 on SB0243.02.COMS
Yes: 47 • No: 1
Senate vote • 1/26/2026
Roll Call 66 on SB0243.02.COMS.AMS004
Yes: 20 • No: 24
Senate vote • 1/26/2026
Roll Call 67 on SB0243.02.COMS.AMS006
Yes: 11 • No: 32 • Other: 1
Actions Timeline
Signed by the Governor
3/5/2026SenatePublic Law 128
3/5/2026SenateSigned by the Speaker
2/27/2026HouseSigned by the President of the Senate
2/27/2026SenateSigned by the President Pro Tempore
2/27/2026SenateSenate concurred with House amendments; Roll Call 285: yeas 47, nays 0
2/25/2026SenateReturned to the Senate with amendments
2/24/2026HouseMotion to concur filed
2/24/2026SenateThird reading: passed; Roll Call 310: yeas 78, nays 18
2/23/2026HouseAmendment #2 (DeLaney) failed; Roll Call 289: yeas 31, nays 63
2/19/2026HouseSecond reading: amended, ordered engrossed
2/19/2026HouseAmendment #3 (DeLaney) failed; Roll Call 288: yeas 35, nays 58
2/19/2026HouseAmendment #1 (Hamilton) failed; Roll Call 287: yeas 38, nays 56
2/19/2026HouseAmendment #7 (Thompson) prevailed; voice vote
2/19/2026HouseAmendment #5 (Thompson) prevailed; voice vote
2/19/2026HouseCommittee report: amend do pass, adopted
2/17/2026HouseFirst reading: referred to Committee on Ways and Means
2/2/2026HouseReferred to the House
1/29/2026SenateSenator Alting added as coauthor
1/28/2026SenateThird reading: passed; Roll Call 122: yeas 47, nays 1
1/28/2026SenateHouse sponsor: Representative Thompson
1/28/2026SenateCosponsor: Representative Snow
1/28/2026SenateAmendment #2 (Yoder) failed; voice vote
1/26/2026SenateAmendment #6 (Young M) failed; Roll Call 67: yeas 11, nays 32
1/26/2026SenateAmendment #5 (Young M) failed; voice vote
1/26/2026Senate
Bill Text
Engrossed Senate Bill (S)
Enrolled Senate Bill (S)
Introduced Senate Bill (S)
Senate Bill (H)