Indiana income tax rates for 2026 combine a flat state rate of 2.95 percent with a county rate that ranges from 0.5 percent to 3.0 percent depending on where you live. Add the two together and your total Indiana income tax falls somewhere between roughly 3.45 percent and 5.95 percent of your Indiana adjusted gross income.1Indiana Department of Revenue. Rates, Fees and Penalties2Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax
The Flat State Rate
Indiana does not use tax brackets. Every taxpayer pays the same percentage on Indiana adjusted gross income, whether that income is $25,000 or $250,000. For 2026, that rate is 2.95 percent, and it applies to individuals, trusts, and estates with Indiana income.3Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate
The rate has been dropping. It was 3.05 percent in 2024, and the legislature has already written a further cut to 2.9 percent into the statute for 2027.3Indiana General Assembly. Indiana Code 6-3-2-1 – Imposition of Tax; Tax Rate Those reductions are locked in rather than proposed.
County Rates and How Yours Is Set
All 92 Indiana counties charge their own local income tax on top of the state rate. Porter County sits at the low end for 2026 at 0.5 percent; Randolph County sits at the high end at 3.0 percent.2Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax On a $60,000 income, that’s the difference between $300 and $1,800 in county tax alone.
Your county rate is fixed by where you lived on January 1 of the tax year, not where you worked and not where you moved later. If you move to a different Indiana county on January 2, you still owe the old county’s rate for the entire year.4Indiana Department of Revenue. Income Tax Information Bulletin 32 – General Information on Local Income Taxes If you live outside Indiana but work in an Indiana county, the rate keys off your principal place of work as of January 1.2Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax
County rates can change twice a year, on January 1 or October 1.1Indiana Department of Revenue. Rates, Fees and Penalties Employers withhold county tax based on the residency information you give them, so update your records with a new employer or after a move before the year starts.
What Income the Rates Apply To
Indiana starts from your federal adjusted gross income, then applies its own additions and subtractions to arrive at Indiana AGI. That final figure is what gets multiplied by 2.95 percent and by your county rate.
Indiana does not offer a standard deduction or itemized deductions the way the federal return does. Instead, it uses a system of flat-dollar exemptions:
- $1,000 personal exemption for yourself, and another $1,000 for a spouse on a joint return.5Indiana Department of Revenue. Income Tax Information Bulletin 117
- $1,000 for each qualifying dependent.5Indiana Department of Revenue. Income Tax Information Bulletin 117
- An additional $1,500 for each qualifying child, which increases to $3,000 in the first year you claim that child. Combined with the $1,000 dependent exemption, a newly claimed child can produce $4,000 in exemptions the first year.6Indiana Department of Revenue. Deductions
- $1,000 for a taxpayer or spouse age 65 or older, and $1,000 for a taxpayer or spouse who is blind.7Indiana Department of Revenue. Seniors
- An extra $500 if you qualify as elderly or blind and your federal AGI is under $40,000 ($20,000 if married filing separately).8Indiana General Assembly. Indiana Code 6-3-1-3.5
Getting these exemptions right matters because they shrink the income both the state rate and the county rate apply to.
Credits That Reduce the Tax Itself
A few Indiana credits come off your tax liability directly after the rates have done their work.
The CollegeChoice 529 credit equals 20 percent of what you contribute to an Indiana CollegeChoice 529 plan, capped at $1,500 per year ($750 if married filing separately). To reach the cap, you’d contribute $7,500 in a year.9Indiana General Assembly. Indiana Code 6-3-3-12 – Credit for Contributions to College Choice 529
Indiana’s earned income tax credit is tied to the federal EITC. If you qualify federally, Indiana adds a state credit worth a percentage of the federal amount, and it’s refundable, so it can generate a refund even when no Indiana tax is owed.10Indiana Department of Revenue. Credits
Low-income seniors age 65 or older may qualify for the unified tax credit for the elderly, claimed on Form SC-40. Income limits are $2,500 for single filers, $3,500 for a married couple with one spouse 65 or older, and $5,000 for a married couple where both spouses are 65 or older.7Indiana Department of Revenue. Seniors
If You Live or Work Across State Lines
Indiana has reciprocal income tax agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin.11Indiana Department of Revenue. Income Tax Information Bulletin 33 – Withholding Requirements for Nonresident Employees If you live in one of those states and work in Indiana, your wages are taxed by your home state, not by Indiana’s state rate. File Form WH-47 with your Indiana employer to stop Indiana state withholding.12Indiana Department of Revenue. Certificate of Residence
Reciprocity only covers the state portion. Indiana county tax still applies to nonresidents working in an Indiana county, and employers still have to withhold it, keyed to the county of your principal workplace as of January 1.2Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax
If you’re an Indiana resident with income from a state that doesn’t have a reciprocity agreement, you file in both states, and Indiana gives you a credit on Schedule G for the income tax paid to the other state so the same income isn’t taxed twice.10Indiana Department of Revenue. Credits
Filing, Estimated Payments, and Late Costs
Indiana’s return is due April 15. Residents file Form IT-40; part-year residents and nonresidents file Form IT-40PNR. E-filing is available through IRS-approved providers, and lower-income filers can use INfreefile. Paper returns can take up to 12 weeks to process.13Indiana Department of Revenue. E-file Options
If you expect to owe $1,000 or more in combined state and county tax beyond what withholding covers, you need to make quarterly estimated payments. This most often hits self-employed workers, freelancers, and people with substantial investment income. Missing estimated payments can trigger penalties and interest even if you pay in full at filing.14Indiana Department of Revenue. Estimated Payments
If you can’t pay by April 15, file anyway. The failure-to-file penalty is 20 percent of the unpaid tax, while the failure-to-pay penalty is 10 percent (or $5, whichever is greater), and interest on the unpaid balance runs at 7 percent for 2026.1Indiana Department of Revenue. Rates, Fees and Penalties15Indiana Department of Revenue. Departmental Notice 3 – Interest Rates for Calendar Year 2026 Filing on time cuts the penalty in half even when the tax itself has to wait.