What Are Indiana’s State and County Income Tax Rates?

Understanding Indiana’s individual income tax system is important for residents managing their personal finances. The state employs a flat tax rate, which simplifies calculations compared to progressive tax systems. However, local county income taxes introduce a layer of complexity. Becoming familiar with these components helps ensure accurate tax planning and compliance for individuals living or working in the state. This guide provides an overview of Indiana’s income tax structure, from state rates to filing procedures.

The Indiana State Income Tax Rate

Indiana levies a flat individual income tax rate on most income earned by its residents. For the 2024 tax year, filed in 2025, the state income tax rate is 3.05%. This rate applies uniformly, regardless of an individual’s income level or filing status. The state plans to gradually reduce this rate to 2.9% by 2027, with a reduction to 3.00% for the 2025 tax year.

Non-residents may also be subject to Indiana state income tax if they have income sourced from within Indiana. This ensures income generated within the state’s borders contributes to its revenue. The flat rate system provides a straightforward approach to state-level taxation for all applicable taxpayers.

Understanding County Income Taxes

All 92 counties in Indiana impose their own local income taxes, in addition to the statewide income tax. These county income tax rates vary considerably, ranging from 0.5% up to 3%, with an average rate of about 1.6%. Each county determines its specific rate based on local budgetary needs, funding services such as schools and public safety.

A taxpayer’s county income tax liability is generally determined by their county of residence or principal employment as of January 1st of the tax year. If an individual lives out-of-state but works in an Indiana county, they are subject to that county’s rate. Changes in residency or employment county during the year do not affect the county tax liability for that specific tax year once the January 1st determination is made. Taxpayers can find current county income tax rates by consulting the Indiana Department of Revenue (DOR) website, which publishes updated rates in Departmental Notice #1 and in the annual IT-40 Income Tax Instruction Booklets.

Determining Your Taxable Income

Indiana’s income tax calculation generally begins with an individual’s federal adjusted gross income (AGI). This federal figure serves as the foundation for determining state taxable income. Most types of income, including wages, salaries, interest, dividends, self-employment earnings, and capital gains, are typically subject to Indiana income tax.

While Indiana largely aligns with federal AGI, certain state-specific modifications can reduce a taxpayer’s gross income to arrive at their Indiana taxable income. Indiana does not have a standard deduction like the federal system, but it offers personal exemptions. Taxpayers can claim a $1,000 exemption for themselves and an additional $1,000 for a spouse if filing jointly.

Beyond personal exemptions, Indiana provides various deductions that can further lower taxable income. Examples include deductions for certain military income, civil service annuity income for eligible individuals, and specific retirement income. Other potential deductions can include student loan interest payments paid by an employer, or premiums paid for Indiana Partnership long-term care insurance. These adjustments are detailed in forms and guidance provided by the Indiana Department of Revenue.

Filing Your Indiana Income Tax Return

The standard filing deadline for Indiana state tax returns is April 15th of each year, or the next business day if April 15th falls on a weekend or holiday. An extension to file can be requested until November 17th; however, this only extends the filing deadline, not the payment deadline. Interest will accrue on any unpaid taxes from the original April 15th due date, but penalties may be waived if at least 90% of the tax liability is paid by the original due date and the remaining balance is settled by the extension date.

Taxpayers have several common methods for filing their Indiana income tax return. They can file online directly through the Indiana Department of Revenue’s INtime system, which is a customer portal designed for managing tax accounts. Many commercial tax software programs also support Indiana state tax filings, allowing taxpayers to prepare and submit their returns electronically. Alternatively, individuals can choose to mail a paper return, using forms like Form IT-40 for full-year residents or Form IT-40PNR for part-year residents and non-residents. After filing, taxpayers can check the status of their refund or payment on the INtime portal and may receive communication from the Department of Revenue regarding their return.