Indiana 529 tax credit in 2026
Indiana pays back a fixed share of each deposit as a credit, so a dollar is worth the same at any income until the ceiling or the tax bill gets in the way.
Indiana tax saved on this contribution
$1,200
20.0 % of what you put in comes back on your 2026 return.
| Credit on your state return | $1,200 |
| Your state marginal rate | 2.95 % |
| Cap that applies this year | $7,500 |
| Back per $1,000 contributed | $200 |
Indiana: Nonrefundable credit equal to the lesser of 20% of contributions to Indiana529 accounts, the state AGI tax liability after other credits, or $1,500 per single or joint return ($750 married filing separately); no carryback or carryforward; contributions made by April 15 may be elected for the prior year. Read on 2026-10-19. No federal deduction exists for 529 contributions.
| Taxable income | Marginal rate | Tax saved |
|---|---|---|
| $50,000 | 2.95 % | $1,200 |
| $100,000 | 2.95 % | $1,200 |
| $200,000 | 2.95 % | $1,200 |
| $400,000 | 2.95 % | $1,200 |
Worked out by Radif Partners · How we calculate · Indiana rule read on October 19, 2026, brackets of tax year 2026 · not tax advice
Indiana gives a credit, not a deduction: 20 % of what you put into an Indiana529 account during the year comes off your state income tax, up to $1,500 per return, single or joint, which is reached with $7,500 of contributions. The credit cannot exceed the Indiana adjusted gross income tax you owe after other credits, it cannot reduce county income tax, and an unused part neither carries back nor forward. At the flat 2.95 % state rate for 2026, the full credit needs roughly $50,847 of taxable income; a single worker at $30,000 who deposits $7,500 gets $885. Deposits made by April 15 can be elected for the prior year. Indiana is stricter than federal law on the way out: Roth IRA rollovers, student loan payments, K-12 costs other than in-state tuition and rollovers to any other 529 trigger repayment of the credit.
| Benefit for contributions | Credit |
|---|---|
| Cap | $7,500 single, $7,500 joint per return |
| Credit rate | 20 % |
| Largest credit | $1,500 single, $1,500 joint |
| Another state’s plan counts | No, in-state plan only |
| State plans (official names, no recommendation) | Indiana529 Direct Savings Plan, Indiana529 Advisor |
| Account balance limit | $450,000 |
| K-12 withdrawals qualified for state tax | Partly |
| 529 to Roth IRA rollover qualified | No |
| Student loan payments qualified | No |
| Add-back on a rollover to another state’s plan | Yes |
A fixed share of each dollar, then a hard stop
Information Bulletin #98 of the Indiana Department of Revenue, dated January 2026, sets the credit at the lesser of three amounts: 20 % of contributions, the state tax liability after other credits, and $1,500 per return. Married people filing separately get half that ceiling. There is no tier by income and no extra room for a second child. Past $7,500 of deposits, the next dollar earns nothing on this year's return.
A couple at $90,000 who reach $7,500 take the full $1,500. A couple at $120,000 who manage $3,000 get $600, exactly 20 % of it. Compare that to a deduction at 2.95 %: the same $3,000 subtracted from income would be worth $89. Indiana's credit returns several times more per dollar than its own tax rate would.
When the tax bill is smaller than the credit
The credit is nonrefundable, and it applies only against the state adjusted gross income tax, not the county tax that all 92 counties levy. A household with a modest income may hit that limit before the $1,500 ceiling. The single worker at $30,000 owes less than $1,500 of state tax, so a $7,500 deposit yields $885; the rest is lost, because the bulletin allows no carryforward. Move the income below to see where the limit stops binding.
Indiana credit at your income
Indiana tax saved on this contribution
$1,003
| Credit on your state return | $1,003 |
| Your state marginal rate | 2.95 % |
| Cap that applies this year | $7,500 |
| Back per $1,000 contributed | $134 |
Only Indiana529 counts
The credit is for contributions to the Indiana529 Direct Savings Plan and Indiana529 Advisor. Money put into another state's plan earns nothing in Indiana. A deposit made between January 1 and April 15 can be elected for the prior year, which lets a family that missed December still claim last year's credit.
Where Indiana departs from the 2025 federal changes
Bulletin #98 treats K-12 withdrawals as qualified for Indiana only when they pay tuition at an Indiana school, up to $20,000 from 2026. Tuition at an out-of-state school and the new non-tuition K-12 expenses count as nonqualified for recapture. Postsecondary credential expenses are qualified for distributions from July 5, 2025. Student loan repayments and rollovers to a Roth IRA, both tax-free federally, are on the recapture list.
Loan payments from an Indiana529 account
Can still go to loans tax-free
$10,000
| Lifetime limit left | $10,000 |
| Balance still owed after | $12,000 |
| Indiana treats it as qualified | No |
How the credit is paid back
When money leaves for a use Indiana does not accept, the account owner repays the lesser of 20 % of the nonqualified withdrawals in the year and the total credits claimed. Rollovers to any other 529 plan, Roth IRA rollovers, ABLE transfers other than to Indiana ABLE, and accounts closed within 12 months are all included. A family that claimed the full credit for three years and then takes $10,000 for a loan payment repays $2,000. Each Indiana529 beneficiary can hold up to $450,000, per the November 2022 booklet; a later change was not found, but the plan may have raised it.