The Indiana tax code sets a flat 2.95% individual income tax for 2026, a 7% sales tax, a 4.9% corporate income tax, and locally assessed property taxes capped by the state constitution at 1%, 2%, or 3% of assessed value depending on property type.1Indiana Department of Revenue. Rates, Fees and Penalties Each tax has its own deadlines and its own penalties, and missing them gets expensive fast.
Individual Income Tax
Every Indiana resident pays the same 2.95% state rate on adjusted gross income for 2026, with a scheduled drop to 2.90% in 2027.1Indiana Department of Revenue. Rates, Fees and Penalties On top of that, every county adds its own income tax. Marion County charges 2.02%; other counties run from roughly 0.5% to over 3%. Your county rate is determined by where you live on January 1 of the tax year, not where you work. The Department of Revenue publishes the current chart in Departmental Notice #1, and county rates can adjust in January or October.
Estimated Payments
If withholding won’t cover your bill, or you have significant self-employment or investment income, Indiana requires quarterly estimated payments whenever you expect to owe $1,000 or more for the year.2Indiana General Assembly. Indiana Code 6-3-4-4.1 – Estimated Payments, Declaration of Estimated Tax The dates match the federal quarterly schedule. Falling short triggers a 10% penalty on the underpayment for each period.1Indiana Department of Revenue. Rates, Fees and Penalties
Sales and Use Tax
Indiana’s 7% sales tax applies to most physical goods and certain services.3Indiana Department of Revenue. Sales Tax Groceries are not exempt: food bought at a grocery store gets the full 7%. Prescription drugs and medical equipment are exempt when dispensed by a licensed pharmacist or practitioner.4Indiana General Assembly. Indiana Code 6-2.5-5-18 – Drugs, Medical Equipment, Supplies
If an out-of-state seller doesn’t collect Indiana sales tax on your purchase, you owe the same 7% as use tax. It applies to tangible personal property stored, used, or consumed in Indiana that was acquired in a retail transaction, wherever that transaction occurred, and it specifically covers vehicles, aircraft, and watercraft titled in Indiana.5Indiana General Assembly. Indiana Code 6-2.5-3-2 – Use Tax
Out-of-state businesses selling more than $100,000 into Indiana in the current or prior calendar year must register, collect, and remit sales tax. Indiana dropped its 200-transaction threshold on January 1, 2024, so the dollar figure is the only trigger now. Sales made through a marketplace like Amazon or Etsy don’t count toward that threshold, because the marketplace itself handles the tax.
Property Tax
Property taxes are set locally and applied to assessed value, but Indiana’s constitution caps the total bill as a percentage of gross assessed value:6Department of Local Government Finance. Property Tax Caps – Circuit Breaker Credits
- 1% for homestead property (your primary residence)
- 2% for other residential property, agricultural land, and long-term care facilities
- 3% for all other property, including commercial and personal property
When your calculated bill would exceed the cap, you receive a circuit breaker credit for the difference. These are commonly called the property tax caps or circuit breaker.
Homestead, Supplemental, and Mortgage Deductions
Homeowners who occupy the property as a primary residence get two stacked deductions. The standard homestead deduction is capped at $40,000 for the 2026 assessment date, down from $48,000 in 2025 as part of a restructuring that raises the supplemental deduction.7Department of Local Government Finance. Property Tax Deductions and Credits Overview The supplemental deduction applies to whatever assessed value remains after the standard deduction; for taxes first due in 2026, it equals 40% of that remainder, capped at 75% of the gross assessed value.8Indiana General Assembly. Indiana Code 6-1.1-12-37.5 – Supplemental Deduction for Homesteads On a home assessed at $200,000, the combined 2026 deductions reduce taxable value by $104,000.
If you carry a mortgage on the home, an additional deduction applies equal to the least of your remaining balance, half the assessed value, or $3,000.9Indiana General Assembly. Indiana Code 6-1.1-12-1 – Deduction for Property Financed by Mortgage or Contract The cap keeps it modest, but it stacks on top of the homestead deductions and only requires that the mortgage be recorded with the county recorder.
Payment Deadlines and Late Penalties
Property taxes are paid in two installments. For 2026, the spring installment is due May 10 and the fall installment is due November 10. Pay within 30 days of the due date, with no back taxes owed on the same property, and the penalty is 5% of the unpaid amount. After 30 days, it doubles to 10%.10Department of Local Government Finance. Property Tax Due Dates
Appealing an Assessment
Start with the county’s Property Tax Assessment Board of Appeals (PTABOA). If the PTABOA decision goes against you, file a petition with the Indiana Board of Tax Review within 45 days of notification.11Indiana Board of Tax Review. Taxpayers Guide to Filing a Petition to the IBTR File a separate petition for each parcel and assessment year, and send a copy to the county assessor. Miss the 45 days and you lose the right to appeal that year.
Corporate Income Tax
Indiana taxes C corporations at 4.9% of adjusted gross income. For multistate companies, apportionment uses a single sales factor, so only the share of revenue from Indiana sales determines how much income Indiana can tax.12Indiana General Assembly. Indiana Code 6-3-2-2 – Adjusted Gross Income Derived From Sources Within Indiana Indiana payroll and property don’t enlarge the tax base under this method.
Every corporation, LLC, and other registered entity must also file an annual business entity report with the Secretary of State. The fee is $32 online through INBiz or $50 by paper.13INBiz. Business Entity Reports Skip the filing and the state can administratively dissolve the entity.
Deductions and Exemptions Worth Knowing
Renter’s Deduction
If you rent your primary home in Indiana, you can deduct up to $3,000 from adjusted gross income on your state return. Married couples filing jointly share the same $3,000 cap; married-filing-separately is limited to $1,500 each.14Indiana General Assembly. Indiana Code 6-3-2-6 – Deduction, Rent Payments The rental dwelling has to be subject to Indiana property tax, so renting a tax-exempt property disqualifies you.15Indiana Department of Revenue. Income Tax Information Bulletin 38 – Renters Deduction
Military Income
Starting in 2024, active-duty members of the armed forces who are Indiana residents pay zero state income tax on military wages. That’s a full exemption, not a capped deduction.16Indiana Department of Revenue. Income Tax Information Bulletin 27 – Indiana Adjusted Gross Income Tax Applicable to Military Personnel and Spouses Reserve component and National Guard members can deduct all wages earned from military service, including state active duty. The older $5,000 cap no longer applies to these groups.17Indiana General Assembly. Indiana Code 6-3-2-4 – Military Service Deduction, Retirement Income or Survivors Benefits Deduction
No State Estate or Inheritance Tax
Indiana does not impose a state estate tax or inheritance tax. Estates large enough to trigger federal estate tax may still owe at that level, but Indiana takes nothing at death.
Filing Deadlines and Extensions
Indiana’s tax year matches the federal calendar year, and individual returns are due April 15. Full-year residents file Form IT-40; part-year residents and nonresidents file IT-40PNR.18Indiana Department of Revenue. Current Year Individual Tax Forms Electronic filing through the INTIME portal is the fastest way to a refund.
Need more time? Indiana grants an automatic extension that runs one month past the federal extension deadline, pushing filing to mid-November. Request it through INTIME or on Form IT-9. Here’s the catch that trips people up: the extension covers filing only. Any tax owed is still due April 15, and the late-payment penalty starts running on whatever isn’t paid by then.19Indiana Department of Revenue. Income Tax Information Bulletin 18 – Extensions of Time to File Indiana Individual Income Tax Returns If you can’t pay in full, the DOR will arrange a payment plan that spreads the balance out and keeps you in compliance.
Penalties and Enforcement
Missing the payment deadline costs 10% of the unpaid tax, or $5, whichever is greater. The same 10% applies to late retail sales tax and late withholding tax.20Indiana Department of Revenue. Fines, Fees and Penalties Interest also accrues from the original due date until the balance is satisfied. The rate is set annually by the DOR commissioner at two percentage points above the average investment yield on state general fund money from the prior fiscal year.21Indiana General Assembly. Indiana Code 6-8.1-10-1 – Liability for Interest
Ignore a demand for payment and the DOR can issue a tax warrant after at least 20 days’ notice. A 10% collection fee gets added at that stage.22Indiana General Assembly. Indiana Code 6-8.1-8-2 – Demand Notices, Tax Warrants Once filed with the circuit court clerk, the warrant becomes a judgment and creates a lien against your property and accounts in that county. The sheriff can then garnish wages and levy accounts or other property. The debtor-protection exemptions that shield certain property from ordinary judgments do not apply to tax warrant collections.23Indiana General Assembly. Indiana Code 6-8.1-8-3 – Judgments Arising From Tax Warrants, Collection
Filing a false return or failing to file with intent to evade tax is a Level 6 felony, carrying a possible sentence of six months to two and a half years, plus fines.24Indiana General Assembly. Indiana Code 6-3-6-11 – Evasion of Tax, Offenses, Prosecution The same charge applies to anyone who knowingly refuses to let the DOR examine records or inspect property as the tax code requires. Criminal prosecution requires proof of intent, so honest mistakes and late filings don’t fall in this category.
Appealing a Tax Decision
For income tax, sales tax, and other state-administered taxes, disputes run through the Department of Revenue before reaching court. Request a hearing on an assessment and you’ll eventually get a letter of findings. If it goes against you, you have 180 days to file a petition with the Indiana Tax Court. Or you can pay the disputed tax, file a refund claim, and appeal a denial within 90 days. If the DOR sits on a refund claim for more than 180 days, it’s deemed denied and you can proceed to court.25Indiana Judicial Branch. About the Tax Court
Refund claims of $5,000 or less for any single year may qualify for the Tax Court’s small claims process, which is simpler and faster than a full proceeding. Self-represented taxpayers are not required to e-file with the Tax Court, though attorneys must use the state’s electronic filing system.