Indiana has a 3.05% flat state income tax — one of the lowest state rates in the Midwest. However, most residents also pay local county taxes.
Indiana State Income Tax Rate
| Tax Type | Rate |
|---|---|
| State income tax | 3.05% (flat) |
| County income tax | 0.5% - 3.13% |
| Total combined rate | 3.55% - 6.18% |
Indiana uses a flat tax rate — everyone pays the same percentage regardless of income.
Indiana County Income Tax Rates
Highest County Rates
| County | County Rate | Total Rate (+ state) |
|---|---|---|
| Pulaski | 3.13% | 6.18% |
| Adams | 2.91% | 5.96% |
| Jay | 2.86% | 5.91% |
| Randolph | 2.77% | 5.82% |
| Fayette | 2.66% | 5.71% |
Major Metro Rates
| County | County Rate | Total Rate (+ state) |
|---|---|---|
| Marion (Indianapolis) | 2.02% | 5.07% |
| Lake (Gary) | 1.5% | 4.55% |
| Allen (Fort Wayne) | 1.35% | 4.40% |
| St. Joseph (South Bend) | 1.75% | 4.80% |
| Hamilton (Carmel) | 1.0% | 4.05% |
Lowest County Rates
| County | County Rate | Total Rate (+ state) |
|---|---|---|
| Ohio | 0.75% | 3.80% |
| Switzerland | 1.0% | 4.05% |
| Vermillion | 1.0% | 4.05% |
Indiana Tax Calculator Examples
Example 1: $75,000 in Marion County (Indianapolis)
| Component | Calculation |
|---|---|
| Gross income | $75,000 |
| State tax (3.05%) | $2,288 |
| County tax (2.02%) | $1,515 |
| Total IN tax | $3,803 |
| Effective rate | 5.07% |
Example 2: $100,000 in Hamilton County (Carmel)
| Component | Calculation |
|---|---|
| Gross income | $100,000 |
| State tax (3.05%) | $3,050 |
| County tax (1.0%) | $1,000 |
| Total IN tax | $4,050 |
| Effective rate | 4.05% |
Indiana Deductions & Exemptions
Standard Deductions (Exemptions)
Indiana doesn’t have a traditional standard deduction but offers exemptions:
| Exemption Type | Amount |
|---|---|
| Personal exemption (each) | $1,000 |
| Dependent exemption (each) | $1,500 |
| Age 65+ exemption | $1,000 |
| Blind exemption | $1,000 |
Renter’s Deduction
Indiana allows renters to deduct up to $3,000 of rent paid during the year.
What Income is Taxed in Indiana?
Taxed:
- Wages and salaries
- Self-employment income
- Interest and dividends
- Capital gains
- 401(k) and traditional IRA distributions (over exemption)
- Private pension income (over exemption)
- Rental income
Not taxed:
- Social Security — Fully exempt
- First $2,000 of retirement/pension income (if 62+)
- Military retirement pay (over exemption limits)
- Indiana municipal bond interest
Retirement Income Exemption
Taxpayers 62 or older get a deduction:
- Up to $2,000 of retirement income (pensions, 401k, IRA) is exempt
Indiana vs. Neighboring States
| State | Top Income Tax Rate | Notes |
|---|---|---|
| Indiana | ~3.05-6.18% | Flat + county |
| Ohio | 3.50% | Progressive |
| Kentucky | 4.0% | Flat |
| Illinois | 4.95% | Flat |
| Michigan | 4.25% | Flat |
Indiana’s state rate is among the lowest, but county taxes add significantly.
Filing Indiana State Taxes
| Filing Requirement | Details |
|---|---|
| Form | IT-40 |
| Due date | April 15 (with federal) |
| E-file | Yes, through IN DOR |
| Extension | 60 days automatic |
Indiana Sales Tax
- State rate: 7%
- No local sales tax
- Groceries exempt (food for home)
Indiana’s 7% sales tax is higher than average.
Tips to Reduce Indiana Taxes
- Choose low-tax county — Hamilton vs. Marion saves 1%+
- Max retirement contributions — 401(k), IRA reduce taxable income
- Claim renter’s deduction — Up to $3,000
- Age 62+ exemption — $2,000 retirement income exempt
- HSA contributions — Triple tax advantage
- Check county tax credits — Some counties offer credits
Indiana Tax Resources
Indiana Department of Revenue
- Website: in.gov/dor
- Phone: 317-232-2240
- County tax rates updated annually
Bottom Line
Indiana has a 3.05% flat state income tax — among the lowest in the region. However, county income taxes of 0.5% to 3.13% bring total rates to 3.55% to 6.18% depending on where you live. Social Security is fully exempt, and taxpayers 62+ get a $2,000 retirement income exemption. Choosing a low-tax county can save significant money annually.
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