Yes, Indiana does have a state income tax. For 2026, the state charges a flat 2.95% on individual income, and every one of Indiana’s 92 counties adds its own local income tax on top of that. The combined rate you actually pay depends on where you live, not where you work.
The Flat State Rate
Indiana taxes all individual income at a single flat rate rather than using graduated brackets. Everyone pays the same percentage, no matter how much they earn or how they file. For the 2026 tax year, that rate is 2.95%.1Indiana Department of Revenue. Rates, Fees and Penalties
The rate has been coming down in small steps. It sat at 3.05% in 2024, dropped to 3.0% in 2025, and reached 2.95% for 2026. It is scheduled to fall again to 2.90% in 2027, with a trigger mechanism that could reduce it further starting in 2030 if state revenue growth stays on track.1Indiana Department of Revenue. Rates, Fees and Penalties
The rate applies to your federal adjusted gross income after certain Indiana-specific modifications. Some items that are excluded or deducted federally get added back for Indiana purposes, and the state offers its own set of deductions and credits that reduce the taxable base before the flat rate applies.
County Income Taxes Everyone Pays
Every county in Indiana imposes a local income tax. All 92 counties have enacted one, so there is no Indiana address where you avoid this layer.2Indiana Department of Revenue. Income Tax Information Bulletin 32 Rates vary widely, from roughly 0.5% in the lowest counties to 3.0% in the highest. Combined with the state’s 2.95%, your total Indiana income tax could land anywhere from about 3.45% to close to 6%.
Residency drives the rate. If you live in Indiana, you pay the rate set by your county of residence as of January 1 of the tax year. That rate applies to your entire adjusted gross income for the year and stays fixed even if you move mid-year. Working in a different county does not change your rate under current law.2Indiana Department of Revenue. Income Tax Information Bulletin 32
Nonresidents who work in Indiana follow a different rule. If your principal place of employment is in an Indiana county, you pay that county’s rate on your Indiana-sourced income, at the same rate residents of that county pay.3Indiana Department of Revenue. Change in Nonresident Tax Rates for Local Income Tax
The state and county taxes run through a single system administered by the Indiana Department of Revenue, so both are handled on one return.
Deductions and Credits That Matter
Indiana does not use the federal standard-versus-itemized framework. It starts with your federal AGI, requires certain add-backs, and then offers its own list of deductions and credits. A handful come up often.
Personal and Dependent Exemptions
Every filer can claim a $1,000 personal exemption. Qualifying dependent children get an additional exemption of $3,000 the first year you claim a particular child, and $1,500 in subsequent years.4Indiana Department of Revenue. Deductions
Renter’s and Homeowner’s Deductions
Renters can deduct up to $3,000 of rent paid on their Indiana home ($1,500 if married filing separately). Homeowners can deduct up to $2,500 of Indiana property taxes paid on their principal residence ($1,250 if married filing separately).4Indiana Department of Revenue. Deductions Both are Indiana-specific and apply whether or not you itemize federally.
Military Retirement Income
Indiana fully exempts military retirement pay and survivor’s benefits. The deduction equals the entire amount of military retirement income included in your federal AGI.4Indiana Department of Revenue. Deductions
Indiana 529 Plan Credit
Contributions to Indiana’s 529 education savings plan earn a state tax credit equal to 20% of your contributions, up to $1,500 per year ($750 if married filing separately). Because it is a credit rather than a deduction, it reduces your tax bill dollar for dollar.5Indiana Department of Revenue. Indiana 529 Savings Plan Credit
Credit for Taxes Paid to Another State
Indiana residents who paid income tax to another state on the same income can claim a credit against their Indiana tax. It equals the lowest of three amounts: the tax actually paid to the other state, the Indiana rate multiplied by the income taxed by both states, or your total Indiana tax liability for the year.6Indiana Department of Revenue. Income Tax Information Bulletin 28 It prevents double taxation, though it may not eliminate it completely when the other state’s rate is higher than Indiana’s.
If You Live or Work Across State Lines
Indiana has reciprocal income tax agreements with six neighboring states: Illinois, Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin.7Legal Information Institute. 45 IAC 3.1-1-115 – Reciprocal Agreement States If you live in one of those six states and your only Indiana income is wages, salary, or commissions, Indiana will not tax that income. You file a simplified Form IT-40RNR with Indiana and pay tax only in your home state.8Indiana Department of Revenue. IT-40PNR Part-Year and Full-Year Nonresident Individual Income Tax Booklet
To keep Indiana tax from being withheld from your paychecks in the first place, submit an affidavit of legal residence to your Indiana employer. Skip that step and Indiana tax will come out of your check, leaving you to file to get it back.7Legal Information Institute. 45 IAC 3.1-1-115 – Reciprocal Agreement States
Reciprocity only covers wage-type income. Rental income from Indiana property, business income from Indiana operations, and gains from selling Indiana real estate are still taxable by Indiana, even for residents of reciprocal states, and require Form IT-40PNR.
If you live outside Indiana and outside the six reciprocal states, or if you have Indiana-source income beyond wages, you generally file a nonresident return and report only your Indiana-sourced income. A short-term rule can catch travelers: a nonresident employee who works in Indiana for 30 days or fewer during the calendar year is exempt on those wages, but crossing the 30-day threshold makes all Indiana compensation taxable from day one, not just the days beyond 30.6Indiana Department of Revenue. Income Tax Information Bulletin 28
Filing, Deadlines, and Late Penalties
Indiana individual income tax returns are due April 15, the same day as your federal return. If April 15 falls on a weekend or holiday, the deadline shifts to the next business day. Residents file Form IT-40; nonresidents file either Form IT-40PNR or IT-40RNR depending on their situation.9Indiana Department of Revenue. Filing Deadlines The Department of Revenue’s INTIME portal handles electronic filing, payments, and correspondence, and most commercial tax software supports Indiana returns.
An approved federal extension automatically gives you an Indiana extension, with no separate state form required. You can also request an Indiana-only extension through INTIME or by mailing Form IT-9 before the original deadline. Either way, the extended deadline for 2025 returns filed in 2026 is November 16, 2026.10Indiana Department of Revenue. Extension of Time to File
An extension buys time to file, not time to pay. Tax owed after April 15 accrues interest, and penalties are waived only if you pay at least 90% of the tax due by the original deadline and clear the remaining balance plus interest by November 16.10Indiana Department of Revenue. Extension of Time to File
Filing late without an extension triggers a penalty of $10 per day, up to $250, and that penalty applies even if you owe no tax.11Indiana Department of Revenue. Fines, Fees and Penalties Unpaid tax accrues interest at 7% annually for calendar year 2026, running from the original due date rather than from whenever the DOR sends a notice.12Indiana Department of Revenue. Departmental Notice 3 – Interest Rates for Calendar Year 2026 A balance due gets expensive quickly once both start running.