The Indiana Instructions say,
Human Services Deduction 605
The human services deduction is intended to eliminate any individual income tax imposed on Medicaid recipients who are living in a:
• Hospital,
• Skilled nursing facility,
• Intermediate care facility,
• Licensed county home,
• Licensed boarding or residential home, or
• Certified Christian Science facility.*
The goal of the human services tax deduction is to reduce the affected individual’s adjusted gross income tax liability to zero (-0-).
*An eligible Christian Science facility must be listed with and certified by the Commission for Accreditation of Christian Science Nursing Organizations/Facilities, Inc.
Generally, the deduction should not be used in conjunction with most tax credits in order to create a refund. If you are a Medicaid recipient and live in one of the facilities listed above, to determine whether you are eligible for the deduction you must first prepare your tax return without claiming a human services deduction. Generally, if a refund is due, you are not eligible for a deduction. File your return without claiming the deduction and a refund will be issued. However, if an amount is due, you are eligible to use a deduction.
Enter code 605 on Schedule 2 under line 11 if claiming this deduction
The salient paragraph is "The goal of the human services tax deduction is to reduce the affected individual’s adjusted gross income tax liability to zero (-0-)." That is, enter a number for the deduction that will reduce the taxpayer's taxable state income to zero, so the tax will go to zero. NOTE: read the last paragraph carefully since this deduction is not intended to be used to generate a credit or a refund.
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