The Marion County, Indiana income tax rate is 2.02% of adjusted gross income. It is collected by the Indiana Department of Revenue on the same return you use for state income tax, and it stacks on top of Indiana’s 2.95% state rate for a combined 4.97% on income for residents of the county.1Indiana Department of Revenue. 2024 Indiana County Income Tax Rates and County Codes2Indiana Department of Revenue. Rates Fees and Penalties
Who Pays the 2.02% Rate
Indiana’s local income tax follows where you live, not where you work. If your residence is in Marion County, the 2.02% rate applies to all of your adjusted gross income, including wages earned in another county or another state.3Indiana Department of Revenue. Income Tax Information Bulletin 28 – Application of State and County Income Taxes to Residents with Out-of-State Income and Nonresidents with Indiana Source Income If you commute into Indianapolis from Hamilton, Hendricks, Johnson, or another surrounding county, you don’t pay Marion County’s rate. You pay the rate set by the county where you live.
Your county of residence is fixed by where you lived on January 1 of the tax year, and that determination locks in for the entire year. Move into Marion County on March 1 and you still pay your prior county’s rate through December 31. The rate change takes effect the following January 1.
Employers handle the mechanics for most people. Your employer withholds both state and county tax from each paycheck based on the county code you list on your Indiana WH-4, and remits both to the Department of Revenue.4Indiana Department of Revenue. Withholding Income
How the Tax Is Calculated
The 2.02% is applied to your Indiana adjusted gross income, which starts with your federal AGI and then adjusts for Indiana-specific add-backs and deductions.5Internal Revenue Service. Definition of Adjusted Gross Income There are no separate income bases for state versus county tax. Whatever figure your state tax is calculated on, your Marion County tax is calculated on the same figure. That means every Indiana deduction you qualify for reduces both taxes at once.
The rate itself is set locally under Indiana Code Title 6, Article 3.6, with the county fiscal body acting as the adopting authority.6Indiana General Assembly. Indiana Code 6-3-6-3-1 – Adopting Body; Local Income Tax Council; County Fiscal Body Statute caps a county’s total expenditure rate at 2.9%, so Marion County has room to raise its rate but has not done so.
Filing and Paying
You don’t file a separate Marion County return. Indiana residents file Form IT-40, which reports both the state tax and the county tax on a single form. The return is due April 15, with the deadline shifting to the next business day when the 15th falls on a weekend or holiday.7Indiana Department of Revenue. Individual Income Tax Overview
If you’re self-employed, a contractor, or otherwise have income that isn’t fully covered by withholding, you likely owe estimated quarterly payments. The rule is simple: if you expect at least $1,000 of combined state and county tax not covered by withholding, you need to pay estimates. The four due dates are April 15, June 15, September 15, and January 15 of the following year.8Indiana Department of Revenue. Estimated Payments
The safe harbor for avoiding an underpayment penalty is total payments (withholding plus estimates) equal to at least 90% of the current year’s tax or 100% of last year’s tax. If your prior-year AGI was over $150,000 ($75,000 if married filing separately), the second option rises to 110% of last year’s tax.8Indiana Department of Revenue. Estimated Payments
Deductions That Lower What You Owe
Because Marion County tax rides on the same income figure as state tax, Indiana-level deductions reduce your county liability too. A few common ones:
Military pay. Beginning with tax year 2024, active-duty service members are completely exempt from Indiana income tax on their military wages. Other income (investments, rentals, and so on) remains taxable.9Indiana Department of Revenue. Income Tax Information Bulletin 27 – Indiana Adjusted Gross Income Tax Applicable to Military Personnel and Spouses Reserve and National Guard members can deduct wages from their military service, and military retirees or their surviving spouses can deduct the first $5,000 of retirement or survivor benefits.10Indiana General Assembly. Indiana Code 6-3-2-4 – Military Service Deduction; Retirement Income or Survivors Benefits Deduction
Federal civil service annuity. If you receive a nonmilitary federal pension and are at least 62 by year-end, you can deduct up to $16,000 of annuity income, reduced by any Social Security or Tier 1 Railroad Retirement benefits received during the year. Surviving spouses qualify without the age requirement.11Indiana Department of Revenue. Deductions
Penalties for Paying Late
File your return but underpay, and the penalty is 10% of the unpaid tax or $5, whichever is greater.12Indiana Department of Revenue. Fines, Fees and Penalties Fail to file at all, and the same 10% applies to the full amount due.13Indiana General Assembly. Indiana Code 6-8-1-10-2-1 – Liability for Penalty; Reasonable Cause Short an estimated payment, and there’s a 10% penalty on the underpayment for that installment period.8Indiana Department of Revenue. Estimated Payments
Interest runs on top of penalties. For calendar year 2026, the rate is 7% annually, accruing from the original due date until the balance is paid.14Indiana Department of Revenue. Indiana Department of Revenue Departmental Notice 3
If a balance sits unpaid, the Department of Revenue has administrative collection powers under IC 6-8.1-8-8. It can levy bank accounts by ordering your financial institution to place a 60-day hold on funds up to the amount owed, garnish wages by notifying your employer, or seize and sell personal property. None of these steps require a court order.
Intentional evasion is criminal. Willfully failing to file, filing a false return, or evading payment is a Level 6 felony under Indiana law,15Indiana General Assembly. Indiana Code 6-3-6-11 – Evasion of Tax; Offenses; Prosecution punishable by six months to two and a half years in prison and a fine of up to $10,000.16Indiana General Assembly. Indiana Code 35-50-2-7 – Class D Felony; Level 6 Felony Prosecution is reserved for fraud, not honest errors.
Disputing an Assessment
If the Department of Revenue sends you a proposed assessment you believe is wrong, you have 60 days from the date the notice is mailed to file a written protest explaining your disagreement and attaching any supporting documents.17Indiana Department of Revenue. Appeals Miss that window and the assessment becomes final.
The Department reviews the protest and issues a Letter of Findings with its decision. If you still disagree, you have 90 days from the Letter of Findings to appeal to the Indiana Tax Court, a specialized court that hears tax cases without a jury and reviews the matter fresh.17Indiana Department of Revenue. Appeals A further appeal to the Indiana Supreme Court is possible under Indiana Appellate Rule 63,18Indiana Tax Court. About the Tax Court but the Court accepts few tax cases, so the Tax Court is usually the last practical stop. Federal court is not an option for state and local tax disputes.