Elkhart Urban Enterprise Zone Tax Incentives

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The Elkhart Urban Enterprise Association (EUEA) oversees the Enterprise Zone, an area of the urban community targeted for physical revitalization, job creation and improvements in social and economic conditions. In Elkhart, the Enterprise Zone includes the downtown and its surrounding neighborhoods, as well as its southwest residential and industrial areas.

Businesses located within Elkhart's Enterprise Zone may be eligible for up to three tax incentives. First, for property tax investments. This refers to the increased value of an Enterprise Zone business property due to real and/or personal property investment. The added valuation may be deducted for up to 10 years. Qualified investments include: purchase of an existing building, repair/rehab/modernization of an existing building, construction of a new building, onsite infrastructure improvements, purchase of new manufacturing or production equipment, or retooling of existing equipment.

         Second, for investment cost credit. Purchasers of ownership interest in a business located in the Zone may be eligible for credit against their state tax liability. The allowable credit percentage -- of up to 30% -- depends on the type of investment, the type of business and the number of jobs created. This credit may be applied against individual or corporate Adjusted Gross Income Tax liability. The Indiana Economic Development Corporation determines the qualification and the credit percentage allowed -- prior to the purchase.

         Third, for employment expense credit. Enterprise Zone employers can earn tax credits for employing Zone residents. The credit is the lesser of 10% of the increase in wages paid to qualified employees or $1,500 multiplied by the number of those employees. The credit may be applied against Individual or Adjusted Gross Income Tax, Financial Institutions Tax or Insurance Premiums Tax liabilities.

Lenders associated with the Enterprise Zone may be eligible for loan interest credit. An individual or business that pays taxes in Indiana is entitled to a tax credit on interest income earned from a loan that directly benefits an Enterprise Zone business, increases Enterprise Zone property values or is used to rehab/repair/improve a Zone residence. The credit is equal to 5% of the loan interest received during the year. This credit may be applied against the individual or corporate Adjusted Gross Income Tax, Financial Institutions Tax or the Insurance Premiums Tax. Note: To receive those tax incentives, the lender need not to be located in the Enterprise Zone.

Residents who both live and work in Elkhart's Enterprise Zone (EZ) may also benefit from potential tax-savings. They are qualified if they live in the EZ, they work at least 50% of the time within the EZ and at least 90% of their services as an EZ employee are directly related to the facility where they work within the EZ. If eligible, they may deduct half of their adjusted gross income earned during the year, up to a maximum deduction of $7,500. This could result in an annual tax savings for each resident of up to $255 if they are qualified and if their earnings within the EZ equal or exceed $15,000.

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