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Indiana small businesses could save millions under bill approved by Senate committee

The exterior of the Internal Revenue Service in Washington, D.C. The large, stone building is seen from ground level. The name of the agency is in large letters on the side of the building.
FILE PHOTO: Justin Hicks
IPB News
Indiana legislation would all small businesses to fully deduct their state taxes from their federal taxes.

Indiana small businesses could save millions under legislation unanimously approved by a Senate committee Tuesday.

Businesses can deduct the state taxes they pay from their federal taxes each year. But about half a million businesses in Indiana pay the state’s individual income tax, rather than the corporate income tax.

And that means instead of getting to deduct all their state taxes from their federal taxes, they only get to deduct up to $10,000.

Sen. Scott Baldwin’s (R-Noblesville) bill, SB 2, would remove that cap.

“Resulting in over $50 million annually, as estimated, in federal tax savings for the owners of these small businesses,” Baldwin said.

READ MORE: How do I follow Indiana’s legislative session? Here’s your guide to demystify the process

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Donna Niesen, representing the Indiana CPA Society, said it’s an issue of fairness.

“This bill levels the playing field for businesses and taxpayers in Indiana,” Niesen said.

The measure is not expected to affect Indiana’s tax revenues. It now heads to the full Senate.

Brandon is our Statehouse bureau chief. Contact him at or follow him on Twitter at @brandonjsmith5.

Brandon Smith has covered the Statehouse for Indiana Public Broadcasting for more than a decade, spanning three governors and a dozen legislative sessions. He's also the host of Indiana Week in Review, a weekly political and policy discussion program seen and heard across the state. He previously worked at KBIA in Columbia, Missouri and WSPY in Plano, Illinois. His first job in radio was in another state capitol - Jefferson City, Missouri - as a reporter for three stations around the Show-Me State.