Schedule IT-40QEC: Enterprise Zone Qualified Employee Deduction Certificate (2024)
Indiana · Indiana DOR · Used for tax years 2024
Schedule IT-40QEC is Indiana’s Enterprise Zone Qualified Employee Deduction Certificate, completed by an enterprise zone employer and given to qualified employees. It certifies the employee’s qualified status and reports compensation earned during enterprise zone residency and th
Who files this form
The enterprise zone employer completes Schedule IT-40QEC and gives it to its qualified employees. An employee claiming the deduction must enclose the certificate with their state individual income tax return.
A qualified employee must meet all four conditions:
- Have their principal residence in the enterprise zone where they work.
- Perform services for the employer, at least 90% of which directly relate to the employer’s trade or business located in an enterprise zone.
- Perform services for the employer within an Indiana state enterprise zone at least 50% of the time during the taxable year.
- Work for a business that remains eligible for enterprise zone benefits and incentives.
What you'll need
To claim the deduction, you need the employer-completed Schedule IT-40QEC and either IT-40 Schedule 2 or IT-40PNR Schedule C with your state individual income tax return.
The certificate asks for:
- The employer’s name, address, federal employer identification number and telephone number.
- The employer’s signature, title and date.
- The employee’s name, street address, city of residence and Social Security number.
- The enterprise zone’s name and the dates the employee lived there.
- Compensation for the tax year during the period of residence in the zone, and the deduction amount.
How to file
- The enterprise zone employer completes and signs Schedule IT-40QEC, certifying the compensation paid and the employee’s qualified status.
- The employer gives the completed certificate to the qualified employee.
- The employee claims the deduction on IT-40 Schedule 2 or IT-40PNR Schedule C and encloses Schedule IT-40QEC with their state individual income tax return.
The form does not provide a mailing address or e-filing directions.
Common mistakes
- Exceeding the deduction limit: The form cautions that the deduction is one-half of the compensation amount entered or $7,500, whichever is less.
- Leaving out the certificate: The form requires employees to enclose Schedule IT-40QEC with their state individual income tax return to support the claimed deduction.
Questions people ask
How much can I deduct for 2024?
A qualified employee living and working in a designated enterprise zone may deduct one-half of their earned enterprise zone income or $7,500, whichever is less, from state adjusted gross income.
What counts as enterprise zone income?
It includes wages, salaries, commissions and other compensation paid by an enterprise zone employer to a qualified employee for services, minus any IRA deductions directly related to that earned income.
Who completes the certificate?
The enterprise zone employer completes it and gives it to the qualified employee. The employer signs to certify the compensation paid and that the employee meets the qualified employee definition.
Where do I claim the deduction?
Claim it on IT-40 Schedule 2 or IT-40PNR Schedule C. Enclose Schedule IT-40QEC with your state individual income tax return.
Where can I find the current enterprise zones?
The form directs you to www.aiez.org/#mem for a list of current enterprise zones and contact information for each zone.