Updated October 4, 2026. Quick answer: Yes, as a credit rather than a deduction. Indiana gives “20% of the amount of all contributions the taxpayer makes”, capped at “$1,500 for single individuals and married individuals filing a joint return” and by the taxpayer’s Indiana tax liability after other credits. Only Indiana’s own plan qualifies.
What Indiana allows for 529 contributions
| Item | What the documents say |
|---|---|
| Treatment | Tax credit (not a deduction) |
| Rate and cap | 20% of contributions, up to $1,500 per return, or $750 for married individuals filing separately; also no more than the Indiana tax liability after other credits |
| Carryforward | None: no carryback, carryforward or refund of an unused credit |
| Plans that qualify | The Indiana529 plan only |
| Not-qualified withdrawals | The account owner repays the lesser of 20% of the nonqualified withdrawals or the cumulative credits claimed less credits repaid; a rollover to another 529 plan is not recaptured |
| Source | Indiana Department of Revenue, Income Tax Information Bulletin #98 (January 2026) and Schedule IN-529 |
A $10,000 contribution by a married couple
A married couple filing jointly who put $10,000 into an Indiana529 account: 20% of $10,000 is $2,000, which is above the $1,500 cap, so the credit is $1,500.
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Carryforward and recapture
An unused credit is lost: the taxpayer is “not entitled to a carryback, carryforward, or refund”. On a nonqualified withdrawal the owner “must repay all or part of the tax credit”.
Limit from the tax bill
The credit is also limited by the taxpayer’s Indiana adjusted gross income tax liability for the year after other credits, and the Department’s example says the unusable remainder of the credit is not refunded, carried back or carried forward. A household with a small tax bill may not use all of the credit.
What changes in 2026
The January 2026 bulletin says that beginning in 2026 the K-12 tuition annual allowance rises to $20,000, and that non-tuition K-12 expenses are nonqualified withdrawals for recapture.
Federal rules
A state break sits beside the federal rules for 529 plans: the statute is 26 U.S.C. 529 and the IRS explains it in Publication 970, Tax Benefits for Education.
Common mistakes
- Treating the credit as a deduction; it comes off the tax bill, not the income.
Related: how Indiana taxes retirement income, whether Indiana taxes pensions, the five questions behind any 529 state tax break, and the state-by-state table of 529 deductions.
Sources
- Income Tax Information Bulletin #98, Indiana 529 Savings Plan Credit: https://secure.in.gov/dor/files/reference/ib98.pdf
- Schedule IN-529, Indiana’s CollegeChoice 529 Education Savings Plan Credit (2023): https://forms.in.gov/Download.aspx?id=15782
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.