The exemption of food is essentially limited to groceries and does not extend to restaurant meals, to prepared meals to be consumed either on or off the premises of the merchant, or to food sold through vending machines or by street vendors. Property constituting or consumed in the operation of pollution abatement equipment is exempt. To be directly used, an item must either be actually incorporated in the product or have a direct part in production by either being consumed or directly acting on the article being manufactured during the manufacturing process. The Indiana individual adjusted gross income tax is a flat rate net income tax levied at a rate of 3.4 percent after exemptions. For the individual taxpayer, federal itemized deductions are not allowed.
Unincorporated businesses can deduct certain expenses resulting from the cost of doing business.
Other credits and exemptions are available to the elderly, but with different income tests at varying levels. In 1987, Indiana adopted most of the income definitions of the 1986 federal tax reform act. Corporate Income Taxes Indiana manufacturers calculate three income taxes. There is no corporate Franchise Tax in Indiana.