In Indiana, three separate taxes come out of your paycheck before you see it: federal income tax at rates from 10% to 37% depending on your earnings, a flat 7.65% for Social Security and Medicare, and Indiana’s flat 2.95% state income tax for 2026 plus a county income tax that typically falls somewhere between roughly 0.5% and 3%. How much taxes are taken out of a paycheck in Indiana depends mostly on your federal bracket and which county you lived in on January 1.
Federal Income Tax
Federal withholding is the biggest and most variable line on most paystubs. The system is progressive: your first dollars are taxed at 10%, and each additional slice of income moves into a higher bracket. For 2026, the single-filer brackets are:
- 10% on income up to $12,400
- 12% on $12,401 to $50,400
- 22% on $50,401 to $105,700
- 24% on $105,701 to $201,775
- 32% on $201,776 to $256,225
- 35% on $256,226 to $640,600
- 37% on income over $640,600
Married-joint thresholds are roughly double, starting at $24,800 for the 10% bracket and reaching $768,700 for the 37% bracket.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 These figures change every year with inflation.
Before any of those rates apply, the standard deduction shields part of your income. For 2026, that’s $16,100 for single filers and $32,200 for married couples filing jointly.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 A single Hoosier earning $50,000 owes no federal income tax on the first $16,100.
Your employer figures the actual withholding from the filing status and other information you enter on Form W-4. If you work more than one job, or you and a spouse both work, the default calculation on each check doesn’t account for your combined income landing in a higher bracket. The W-4 offers three ways to fix that: the IRS estimator at irs.gov, the Multiple Jobs Worksheet, or the Step 2(c) checkbox when there are exactly two jobs total.2Internal Revenue Service. Form W-4 (2026) Missing that step is one of the most common reasons people owe money in April.
Social Security and Medicare
FICA is flat and predictable. Every paycheck loses 6.2% to Social Security and 1.45% to Medicare, a combined 7.65%.3Office of the Law Revision Counsel. 26 USC 3101 Rate of Tax Your employer matches that amount separately.
Social Security has an annual wage cap. For 2026, once your year-to-date wages hit $184,500, the 6.2% stops for the rest of the year and your paycheck gets slightly larger.4Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Medicare has no cap and keeps taking 1.45% of every dollar.
High earners hit an extra layer. Once your wages cross $200,000 in a calendar year, your employer starts withholding an additional 0.9% Medicare tax. The threshold you actually owe it at on your return is $250,000 for married-joint and $200,000 for single filers, so it can be reconciled up or down at filing time.5Internal Revenue Service. Topic No. 560, Additional Medicare Tax
Indiana State Income Tax
Indiana charges a flat 2.95% for 2026, applied to every worker regardless of income.6Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax There are no brackets to track. If your taxable pay for a biweekly period is $2,000, Indiana takes $59. Your employer applies the rate after any applicable deductions and exemptions.
Indiana County Income Tax
Every one of Indiana’s 92 counties adds its own income tax on top of the state rate. Rates generally run from about 0.5% to roughly 3%, and the specific figure for each county is published each year in the Indiana Department of Revenue’s Departmental Notice #1.6Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax
The rate that applies to you is based on the county you lived in on January 1 of the tax year, not where you work and not where you live later in the year. If you move in March, your county rate stays locked to your January 1 address through the end of December. You report your county of residence and county of work on Form WH-4, and your employer uses that to set withholding. Submit an updated WH-4 when you move, since the information on file governs the next January 1 determination.
If You Live in Another State
Indiana has reciprocal tax agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin.7Indiana Department of Revenue. Income Tax Information Bulletin #28 Application of State and County Income Taxes Live in one of those states, work in Indiana, and file Form WH-47 with your Indiana employer, and no Indiana state income tax comes out of your check. You pay state tax only to your home state.
Two limits catch people. Reciprocity covers wages, salaries, tips, and commissions only, not rental income or business profits from Indiana sources. And it doesn’t extend to county tax at all. An Ohio resident commuting to Indianapolis still has Indiana county tax withheld on every paycheck.8Indiana Department of Revenue. Income Tax Information Bulletin #33 Withholding Requirements for Nonresident Employees
Nonresidents from any other state who work primarily in Indiana owe county tax at the rate of the Indiana county where they work, on the income they earn there.9Legal Information Institute. 45 IAC 3.1-4-8 Determination of County of Principal Place of Business or Employment If you expect to work in Indiana 30 days or fewer during the year, Form WH-4AFF claims an exemption from county withholding.8Indiana Department of Revenue. Income Tax Information Bulletin #33 Withholding Requirements for Nonresident Employees
How Pre-Tax Deductions Change the Numbers
Traditional 401(k) contributions and employer health insurance premiums come out before tax is calculated, which shrinks the income used for withholding. But they don’t all work the same way against every tax.
Health insurance premiums run through a Section 125 cafeteria plan (the standard setup at most employers) are exempt from both income tax and FICA. Traditional 401(k) contributions reduce your federal and state income tax withholding but not your FICA. So putting $500 per paycheck into a 401(k) lowers the income tax line on your stub, and leaves the Social Security and Medicare lines exactly where they were.
When Withholding Falls Short
If what comes out of your paychecks doesn’t cover what you owe, you’ll write a check in April and possibly pay interest. Indiana charges 7% annual interest on underpayments for 2026.10Indiana Department of Revenue. Interest Rates for Calendar Year 2026 The IRS assesses its own underpayment penalty, adjusted quarterly against the federal short-term rate.
The usual causes are predictable: multiple jobs without a W-4 adjustment, the wrong county on the WH-4, or freelance income on the side that has no withholding at all. Compare your year-to-date withholding on a mid-year paystub against what you expect to owe, and any gap is easier to close over the remaining months than in a single April payment.