What Percent of Your Paycheck is Taken for Taxes in Indiana?

Payroll taxes are amounts employers deduct from an employee’s gross wages. These deductions fund public services and programs at federal, state, and local levels. This article breaks down the taxes taken from paychecks in Indiana and explains how the overall percentage is determined.

Federal Withholding Components

Federal taxes constitute a significant portion of paycheck deductions, funding programs like Social Security and Medicare. Federal income tax is a primary component, calculated based on gross pay, filing status, and Form W-4 elections. This tax is progressive, meaning higher earners generally pay a larger percentage of their income.

Beyond income tax, the Federal Insurance Contributions Act (FICA) funds Social Security and Medicare. For Social Security, employees generally contribute 6.2% of their wages up to an annual wage base limit, which is $168,600 for 2024. Income above this limit is not subject to Social Security tax.

Medicare tax is applied at a rate of 1.45% of all wages, with no wage base limit. An additional Medicare tax of 0.9% applies to wages exceeding certain thresholds: $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately. These FICA taxes are fixed percentages for most income levels.

Indiana State Income Tax Withholding

Indiana imposes a flat state income tax rate on taxable income. For tax year 2024, the state income tax rate is 3.15%. This rate is applied to an individual’s adjusted gross income (AGI).

Employers must withhold this state income tax from employee wages. Withholding ensures employees meet their state tax liabilities. This uniform rate simplifies the state income tax calculation compared to progressive tax systems found in other states. The simplicity of this flat rate means the percentage of income taken for state tax remains constant, regardless of income level, before considering any specific deductions or credits.

Indiana Local Income Tax Withholding

Indiana’s tax structure also includes local income taxes, which vary significantly by county. These taxes are generally levied based on an individual’s county of residence or principal place of employment.

Rates for local income taxes are determined by each county’s council. These rates can change annually, so it is important to verify current rates for your location. For instance, some counties might have rates below 1%, while others could exceed 3%.

To find local income tax rates, the Indiana Department of Revenue (DOR) website is the official resource. The DOR publishes a comprehensive list of current county income tax rates, often updated annually.

Personal Factors Influencing Your Withholding Percentage

While federal, state, and local tax rates are set, the actual percentage of your paycheck withheld for income taxes can vary based on personal choices. IRS Form W-4 is used to communicate withholding preferences to employers. It dictates how much federal and state income tax is withheld from each paycheck.

Choices made on the W-4, such as your filing status, impact withholding. For example, selecting “Married Filing Jointly” typically results in less tax withheld per paycheck compared to “Single.” Claiming dependents on the W-4 also reduces the amount of tax withheld.

Adjustments for other income, such as from a second job or investments, can be entered on the W-4 to ensure sufficient withholding. Anticipated deductions or tax credits can also be accounted for. These choices allow individuals to fine-tune their withholding to match their expected tax liability.

Understanding Your Pay Stub and Official Resources

Your pay stub serves as a detailed record of your earnings and deductions. It typically displays your gross pay. A section for pre-tax deductions, such as health insurance premiums or 401(k) contributions, reduces your taxable wages.

The pay stub then itemizes your tax withholdings, showing amounts for federal income tax, Social Security tax, Medicare tax, Indiana state income tax, and local income tax. Reviewing these figures allows you to verify correct withholding based on your W-4 elections and prevailing tax rates. Any discrepancies should be promptly addressed with your employer’s payroll department.

Official government websites are the best resources for current tax information. The IRS website provides guidance on federal taxes, including Form W-4 and tax tables. For Indiana-specific tax rates and regulations, the Indiana Department of Revenue (DOR) website offers updated county income tax rates and state tax forms. They also frequently offer tax calculators to help estimate withholding.

References

1. IRS. “Topic No. 751 Social Security and Medicare Withholding Rates.” Accessed August 3, 2025.
2. IRS. “IRS.gov.” Accessed August 3, 2025.
3. Indiana Department of Revenue. “IN.gov/dor.” Accessed August 3, 2025.