Student Loan Interest Addback for Prior Years – The State of Indiana Changes It’s Mind

The State of Indiana has reversed it’s rule that student loan interest deducted on the 2010 Federal income tax return must be added back on the 2011 State of Indiana income tax return.  They released this new rule Feburary 10, 2012.   Student loan interest deducted on the 2011 Federal income tax return is still required to be added back on the State of Indiana 2011 income tax return.    The State’s announcement is below.

 

Additional information is now available for use in figuring the student loan interest add-back.

  1. First, no add-back is required for the 2010 tax year.
  1. Second, for Indiana add-back purposes for 2011 going forward (at least through 2012), an individual must refigure his or her deduction as reported on the federal tax return using the following amounts as qualifiers:
    1. the phaseout ranges (as adjusted for inflation) are reduced to $45,000 to $60,000 ($70,000 to $85,000 for joint returns),
    2. the interest is not deductible beyond the first 60 months that interest payments are required, and
    3. there is no deduction for voluntary payments of interest.

Any required add-back will be the difference between the refigured deduction and the student loan interest deduction as reported on your 2011 federal income tax return, Form 1040, line 33, or Form 1040A, line 18.

Add the difference back on Schedule 1, line 7 (if filing Form IT-40), or on Schedule B, line 5 (if filing the Form IT-40PNR). Indicate the add-back by using code 128

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