Yes, Indiana has an income tax. The state charges a flat 2.95% income tax rate for the 2026 tax year, applied to your Indiana adjusted gross income after exemptions.1Indiana Department of Revenue. Rates, Fees and Penalties Every one of Indiana’s 92 counties then layers its own local income tax on top, so your actual total rate depends on where you live. If your gross income exceeds your total personal exemptions, you’re required to file a return.
How the Flat State Rate Works
Indiana doesn’t use brackets. Everyone pays the same percentage of taxable income regardless of what they earn. The 2.95% rate applies to tax year 2026, and it’s scheduled to drop again to 2.9% for tax years beginning after December 31, 2026.2CCH AnswerConnect. Indiana – Rates of Tax – Income Taxes, Personal
Your Indiana calculation starts with the federal adjusted gross income from line 11 of your federal Form 1040.3Indiana Department of Revenue. Your Indiana Tax Return Line By Line Indiana then applies its own add-backs and subtractions. Instead of a standard deduction, the state uses personal exemptions: $1,000 for yourself and $1,000 for each dependent.4Indiana Department of Revenue. Income Tax Information Bulletin 117 – Personal Exemptions and Special Rules Qualifying dependents generate an additional $1,500 exemption, which doubles to $3,000 the first year you claim a child.5Indiana Department of Revenue. Deductions Subtract exemptions and deductions from Indiana AGI, multiply by 2.95%, and you have your state tax before credits.
What Your County Adds On
This is where the sticker price gets bigger. All 92 Indiana counties impose a local income tax, and the spread is wide. Porter County is at 0.5%. Randolph County charges 3.0%. Most counties land somewhere between 1.0% and 2.5%.6Indiana Department of Revenue. 2024 Indiana County Income Tax Rates and County Codes Rates can change in January and October, so check the current schedule before you plan around a number.
Your county rate is set by where you lived on January 1 of the tax year. Move on January 2 and you still owe the whole year’s county tax to the old county.7Indiana Department of Revenue. How to Compute Withholding for State and County Income Tax For residents, the county tax applies to your entire adjusted gross income, not just what you earned inside county lines. Non-residents whose principal place of work is in an Indiana county as of January 1 owe that county’s tax, but only on their Indiana-sourced earnings.
Who Has to File
If you were a full-year Indiana resident and your gross income exceeded your total personal exemptions, you must file. For a single person with no dependents, that threshold is just $1,000.8Indiana Department of Revenue. Who Should File a Tax Return? Someone who leaves Indiana temporarily but keeps their legal home in the state is still a full-year resident, and all their income is taxable regardless of where earned.
The form depends on your residency:
- Form IT-40 for full-year Indiana residents.9Indiana Department of Revenue. IT-40PNR Part-Year and Full-Year Nonresident Individual Income Tax Booklet
- Form IT-40PNR for part-year residents and full-year non-residents, which allocates income so non-residents report only Indiana-sourced wages, business, or rental income.
- Form IT-40RNR, a simplified return for full-year residents of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin whose only Indiana income was wages.10Indiana Department of Revenue. Current Year Individual Tax Forms
Indiana residents who earned income in another state and paid tax there can claim a credit on their Indiana return to prevent double taxation.
Reciprocity With Neighboring States and the County Gap
Indiana has reciprocal wage agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. If you live in one of those states and earn wages in Indiana, you pay state income tax only to your home state.11Indiana Department of Revenue. Income Tax Information Bulletin 28 Indiana residents earning wages in those states report the income as if earned in Indiana and file for a refund of any tax the other state withheld, rather than claiming a credit.
Here’s the trap: reciprocity covers state tax only. A Kentucky resident working in an Indiana county still owes that county’s local income tax on Indiana wages.12Indiana Department of Revenue. Withholding Requirements for Nonresident Employees – Information Bulletin 33
Deadlines, Extensions, and Estimated Payments
Indiana returns are due April 15, matching the federal deadline. A federal extension automatically extends your Indiana filing deadline to November 16, 2026. Extensions push the filing date, not the payment date. Interest runs on any unpaid balance from April 15 forward. Indiana will waive the late-filing penalty if you pay at least 90% of your tax by April 15 and pay the remainder with interest by the November extension deadline.
Failing to file at all carries a 20% penalty on tax due. A fraudulent return carries a 100% penalty.1Indiana Department of Revenue. Rates, Fees and Penalties
Self-employed workers, freelancers, and landlords need to make quarterly estimated payments if they expect to owe $1,000 or more in combined state and county tax for the year.13Indiana Department of Revenue. Estimated Payments The due dates track the IRS schedule: April 15, June 15, September 15, and January 15 of the following year, shifting to the next business day when the date falls on a weekend or holiday.
Credits and Deductions Worth Knowing
Several Indiana-specific breaks can meaningfully cut what you owe.
Indiana 529 Education Savings Credit
Contributions to an Indiana 529 plan earn a 20% state tax credit, up to $1,500 per year ($750 if married filing separately).14Indiana General Assembly. Indiana Code 6-3-3-12 – Credit for Contributions to College Choice 529 Education Savings Plan Hitting the full credit takes $7,500 in contributions. Because it’s a credit, it reduces your tax dollar for dollar.
Renter’s Deduction
Renters can deduct up to $3,000 of rent paid on a primary residence, provided the property is subject to Indiana property tax.15Indiana General Assembly. Indiana Code 6-3-2-6 – Deduction Rent Payments
Property Tax Deduction
Homeowners can deduct up to $2,500 of Indiana property tax paid on their principal residence, or $1,250 if married filing separately.5Indiana Department of Revenue. Deductions
Military Retirement Pay
Military retirement income is fully deductible from Indiana AGI. The full exemption took effect for tax years beginning after 2021.16Indiana General Assembly. Indiana Code 6-3-2-4 – Military Service Deduction Retirement Income or Survivors Benefits Deduction
Indiana Earned Income Credit
If you qualify for the federal EITC, Indiana adds a state credit equal to 10% of your allowed federal amount.17Internal Revenue Service. States and Local Governments With Earned Income Tax Credit
Social Security and Retirement Income
Indiana does not tax Social Security benefits. Any portion included in your federal AGI gets deducted back out on your Indiana return.18Indiana Department of Revenue. Income Tax Information Bulletin 26 Railroad retirement benefits are treated the same way.
Low-income seniors 65 or older may qualify for the Unified Tax Credit for the Elderly, which can wipe out Indiana liability entirely. To use the one-page Form SC-40, income must be under $2,500 if single or widowed, under $3,500 if married with one spouse 65 or older, or under $5,000 if both spouses are 65 or older.19Indiana Department of Revenue. Seniors