Indiana Income Tax Rate History: Individual, Corporate, and Local

Indiana’s income tax rate for individuals is a flat 2.95% for the 2026 tax year, and it is scheduled by statute to drop to 2.90% in 2027.1Indiana Department of Revenue. Rates, Fees and Penalties Corporations pay a separate flat 4.9%. Every Indiana county also charges its own local income tax on top of the state rate, so what you actually owe depends on where you live.

The 2026 Individual Rate and What Comes Next

The 2.95% rate applies to Indiana adjusted gross income for the 2026 tax year. Under IC 6-3-2-1, the rate falls once more to 2.90% for 2027 and remains at 2.90% through 2029.2Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate; Calculation and Certification of Individual Adjusted Gross Income Tax Rate The schedule is fixed in the statute; earlier versions of the law tied further cuts to revenue-growth and pension-funding certifications, but those conditions were replaced with the flat schedule now on the books.

Every Individual Rate Since 1963

Indiana adopted its flat individual income tax in 1963 under the Adjusted Gross Income Tax Act. The rate then held at 3.4% for roughly four decades before the legislature began cutting it. If you are reconciling a return for a prior year, here is what the state rate was:

  • Before 2015: 3.4%
  • 2015–2016: 3.3%
  • 2017–2022: 3.23%
  • 2023: 3.15%
  • 2024: 3.05%
  • 2025: 3.0%
  • 2026: 2.95%
  • 2027–2029: 2.9%
2Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate; Calculation and Certification of Individual Adjusted Gross Income Tax Rate

County Local Income Taxes Add to the State Rate

Every Indiana county levies its own local income tax on top of the state rate. Two people earning the same salary can owe different amounts depending on which county they live in on January 1.

Before 2015, counties chose among three separate levies: the County Adjusted Gross Income Tax, the County Option Income Tax, and the County Economic Development Income Tax. That year the legislature consolidated all three into a single Local Income Tax under IC 6-3.6, and county fiscal bodies now set one combined rate covering property tax relief, public safety, and other local needs.3Indiana General Assembly. Indiana Code 6-3.6-3-1 – Adopting Body; Local Income Tax Council; County Fiscal Body4Indiana Department of Revenue. Income Tax Information Bulletin 32 – General Information on Local Income Taxes

For 2026, county rates run from 0.5% in Porter County to 3.0% in Randolph County.5Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax Combined with the 2.95% state rate, your total Indiana income tax rate for 2026 falls somewhere between roughly 3.45% and 5.95%. County rates can change each January, so it is worth checking the Department of Revenue’s withholding tables before you update a W-4.

The Corporate Income Tax Rate

Indiana corporations pay a flat 4.9% on adjusted gross income. That rate has been in place since July 1, 2021, and is the endpoint of a decade of scheduled reductions from the 8.5% rate that held from 2003 through mid-2012:

  • 2003 – June 30, 2012: 8.5%
  • July 1, 2012 – June 30, 2013: 8.0%
  • July 1, 2013 – June 30, 2014: 7.5%
  • July 1, 2014 – June 30, 2015: 7.0%
  • July 1, 2015 – June 30, 2016: 6.5%
  • July 1, 2016 – June 30, 2017: 6.25%
  • July 1, 2017 – June 30, 2018: 6.0%
  • July 1, 2018 – June 30, 2019: 5.75%
  • July 1, 2019 – June 30, 2020: 5.5%
  • July 1, 2020 – June 30, 2021: 5.25%
  • July 1, 2021 – present: 4.9%
6Indiana Department of Revenue. Corporate and Sales Tax History

The corporate rate changes took effect on July 1 rather than January 1, so businesses whose fiscal year straddled a change date had to prorate. IC 6-3-2-1(c) provides a weighted-days formula for that calculation.2Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate; Calculation and Certification of Individual Adjusted Gross Income Tax Rate

Penalties If You File or Pay Late

Indiana charges two separate penalties, and they can stack:

  • Late filing: $10 per day past the due date, capped at $250.
  • Late payment: 10% of the unpaid tax, or $5, whichever is greater.
7Indiana Department of Revenue. Fines, Fees and Penalties

Interest also runs on unpaid balances under IC 6-8.1-10-1. Owe $2,000 and file two weeks late without paying, and you are already at $140 in daily filing penalties plus a $200 late-payment penalty before interest is added. Filing on time and paying what you can, even if it is not the full balance, avoids the daily penalty entirely.