Indiana Senate Bill 243 (SB 0243), signed into law on March 5, 2026, amends several sections of the Indiana Code concerning taxation. Key provisions include new penny rounding rules, new adjusted gross income deductions, and increased gambling withholding thresholds.
The bill introduces a penny phaseout rounding framework under two new code provisions. IC 5-36.5, effective January 1, 2027, requires state and local units to round cash tax payments down to the nearest nickel, with the government absorbing the loss. IC 23-15-13, effective upon passage, applies to business entities and allows them to choose between rounding down, rounding up, or rounding to the nearest nickel on cash transactions. Both provisions apply only to cash payments and do not affect electronic or check payments. When a business entity collects taxes on behalf of the state, the tax must be calculated on the pre-rounded amount, with specific rules governing withholding, remittance, and transactions involving multiple taxes.
For tax year 2026, the bill also adds three deductions from Indiana adjusted gross income, mirroring their federal counterparts: qualified tips (IRC Section 224), qualified overtime compensation (IRC Section 225), and qualified passenger vehicle loan interest (IRC Section 163(h)(4)), with the vehicle loan interest deduction limited to Indiana residents.
Finally, Section 20 raises Indiana’s gambling withholding thresholds to a uniform $2,000 across all four categories (keno, slot machines, lottery prizes, and charity gaming prizes), retroactive to January 1, 2026. Beginning in 2027, these thresholds will automatically adjust to match any federal inflation adjustment under IRC Section 6041(h).
To review Indiana Senate Bill 243 in greater detail, click here.
