Clark County, Indiana’s local income tax is 2.0% of Indiana adjusted gross income, charged on top of the state’s 2.95% income tax rate for 2026.1Indiana Department of Revenue. Rates Fees and Penalties You owe it if Clark County was your home on January 1 of the tax year, or if you live out of state but your principal place of work sits inside the county. The tax is reported on Schedule CT-40 as part of your Indiana resident return.
Who Owes the 2.0% Rate
The January 1 Residency Rule
Indiana locks in your county tax obligation based on where you lived on January 1 of the tax year. If Clark County was home on that date, you owe the 2.0% rate for the entire year, even if you move to another Indiana county in February.2Indiana Department of Revenue. Income Tax Information Bulletin 32 – General Information on Local Income Taxes The reverse also holds: moving into Clark County on January 2 means your old county’s rate applies for the rest of that year, and Clark’s rate only kicks in the following January.
Kentucky Commuters Still Owe County Tax
This is where Louisville-area workers routinely trip up. Indiana has a reciprocal agreement with Kentucky that exempts Kentucky residents from Indiana’s state income tax on wages earned across the river. That agreement does not extend to local income tax.3Indiana Department of Revenue. Income Tax Information Bulletin 28 If you live in Kentucky and your principal place of work is in Clark County, say Jeffersonville, you still owe the 2.0% county tax on income earned there at the same rate residents pay.2Indiana Department of Revenue. Income Tax Information Bulletin 32 – General Information on Local Income Taxes
Income That Doesn’t Count
Clark County’s tax is calculated on your Indiana adjusted gross income, not your federal AGI. Two state-level deductions matter for most households:
- Social Security and railroad retirement benefits included in your federal AGI are fully deductible on your Indiana return, so they never enter the county tax calculation.4Indiana Department of Revenue. Income Tax Information Bulletin 26
- For tax years 2022 and later, the full amount of military retirement pay and survivor’s benefits qualifies for a state deduction, removing it from both your state and county tax base.5Indiana Department of Revenue. Income Tax Information Bulletin 06 – Civil Service Annuity Adjustment and Military Retirement or Survivor’s Benefits Deduction
Both flow through automatically when you compute your Indiana adjusted gross income on Form IT-40. There’s no separate county-level form to claim them.
How to Calculate and File
You report Clark County tax on Schedule CT-40, which attaches to the standard Indiana resident return, Form IT-40.6Indiana Department of Revenue. Current Year Individual Tax Forms Enter Clark County’s code (10), apply the 2.0% rate, and multiply your Indiana adjusted gross income by 0.02.
An example: if your Indiana adjusted gross income is $52,000, your Clark County tax is $1,040. For a $60,000 income it’s $1,200. That amount is added to your state tax liability on the IT-40 to produce your total balance or refund. Any county tax your employer withheld during the year gets credited against it.
The fastest way to file and pay is through the INTIME portal on the Department of Revenue’s website, which handles electronic filing, bank or card payment, and immediate confirmation.7Indiana Department of Revenue. INTIME Online Services Paper returns are accepted but process more slowly. The Indiana filing deadline matches the federal one, typically April 15.
Getting Your Withholding Right
Your employer withholds Clark County tax from each paycheck based on what you reported on Indiana Form WH-4, the employee certificate that identifies your county of residence and your county of work.8Indiana Department of Revenue. Withholding Tax Forms If you move into Clark County, submit an updated WH-4 to your payroll department. Because the January 1 rule governs the actual obligation, your new rate won’t apply until the next tax year, but your employer still needs current information for the transition.
Check a pay stub now and then. If withholding shows the wrong county, catching it early avoids a balance due at filing.
Estimated Payments for Self-Employed Workers
If you’re self-employed or have significant non-wage income like rental or investment earnings, you likely need quarterly estimated payments covering both state and county tax. Indiana requires them whenever you expect to owe $1,000 or more in combined state and county tax not covered by withholding.9Indiana Department of Revenue. Estimated Payments
Installments are due April 15, June 15, September 15, and January 15 of the following year, with weekend and holiday due dates shifting to the next business day.9Indiana Department of Revenue. Estimated Payments Each installment should reflect roughly a quarter of your expected annual liability at both the 2.95% state rate and the 2.0% county rate.
Penalties for Late or Short Payment
Indiana treats county tax the same as state tax for enforcement. Failing to file a return brings a penalty of 20% of the unpaid tax; a fraudulent return carries a 100% penalty.1Indiana Department of Revenue. Rates Fees and Penalties
For estimated tax, the penalty is 10% of the underpayment for each installment period you fell short.9Indiana Department of Revenue. Estimated Payments You can generally avoid it if your total payments and credits equal at least 90% of your current-year tax or 100% of last year’s tax. If your federal adjusted gross income exceeds $150,000 (or $75,000 for married filing separately), the prior-year safe harbor rises to 110%. If the penalty applies, calculate it on Schedule IT-2210 and include it with your return.
Interest also accrues on unpaid balances. Paying what you can by the deadline and setting up a payment plan through INTIME is almost always cheaper than letting the bill sit.