Indiana Estimated Taxes: Your Requirements

Indiana’s estimated tax system is a method for paying taxes on income that is not subject to employer withholding. It functions as a pay-as-you-go plan, ensuring that individuals meet their state and county tax obligations throughout the year. This approach prevents a large tax bill when filing an annual return by requiring periodic payments on earnings from various sources. The system is designed to align tax payments with the timing of when income is received.

Who Must Pay Indiana Estimated Taxes

The requirement to pay Indiana estimated taxes is triggered by specific financial conditions. An individual must make these payments if they anticipate owing $1,000 or more in state and county taxes for the tax year, after accounting for all withholdings and credits. If your withholdings and credits are not sufficient to cover your expected tax liability, you will likely need to make estimated payments.

A component in determining the need to pay is the “safe harbor” rule, which provides a benchmark to avoid penalties. You are expected to have paid, through withholding and credits, at least 90% of your current year’s tax liability or 100% of your previous year’s tax liability. For individuals with a federal adjusted gross income exceeding $150,000 ($75,000 for married filing separately), this second threshold increases to 110% of the prior year’s tax.

Income that necessitates estimated tax payments comes from sources outside of traditional employment. Self-employment earnings, income from freelance or gig economy work, and profits from a small business are common examples. Investment-related income, such as dividends, interest, and capital gains, can also create a tax liability that is not covered by standard withholding. Rental income from properties is another frequent reason individuals find themselves needing to make estimated tax payments.

Calculating Your Required Payment

To calculate your required estimated tax payment, you must first project your total financial picture for the year. This involves estimating your annual adjusted gross income from all sources, both those with and without withholding. You will also need to forecast any deductions and tax credits you are eligible to claim, as these will reduce your overall tax liability.

The Indiana Department of Revenue (DOR) provides Form ES-40, Estimated Tax for Individuals, which includes a worksheet to guide you through the calculation. This worksheet helps you figure your total estimated state and county tax. Using your projected income and deductions, you will find your estimated Indiana adjusted gross income, apply the 3.0% state tax rate for 2025, and then add any applicable county tax.

The goal of this calculation is to meet the “safe harbor” requirements to avoid an underpayment penalty. It is often easier to use the prior-year tax figure, as it is a known amount. However, a significant drop in income may make the current-year estimate more beneficial.

Once you have determined your total estimated tax for the year using the ES-40 worksheet, you divide this amount by four. This determines the amount of each of your four quarterly installment payments. If your income changes during the year, you can adjust your later payments to reflect the new expected total.

Payment Due Dates and Submission Methods

You must submit your quarterly payment by the established deadlines. The payments are due in four installments throughout the year. For 2025, the due dates are:

• April 15
• June 16
• September 15
• January 15, 2026

The Indiana DOR offers multiple methods for submitting your estimated tax payments. You can pay electronically through the state’s online portal, INTIME (Indiana Taxpayer Information Management Engine). After creating an account, you can make a payment directly from a bank account or by credit card.

Alternatively, you can pay by mail. When you download Form ES-40, it includes a payment voucher for each installment period. You would fill out the appropriate voucher with your personal information and the amount of your payment. The payment should be made with a check or money order payable to the Indiana Department of Revenue, with your Social Security number written on the memo line to ensure it is credited correctly.

Understanding Underpayment Penalties

Failing to pay enough estimated tax throughout the year can result in a penalty. If your total payments do not meet the “safe harbor” minimums, the Indiana DOR may assess a penalty for underpayment. This penalty is calculated on Form IT-2210, Underpayment of Estimated Tax by Individuals.

The penalty is 10% of the underpayment for the period the tax remained unpaid. The calculation determines how much you should have paid each quarter and compares it to what you actually paid to identify any shortfall.

The DOR can calculate the penalty for you and send a bill. However, if you believe you qualify for an exception to the penalty, such as in the case of farmers or fishermen who have different requirements, you must file Form IT-2210 to demonstrate your eligibility.