About Indiana State Income Tax

Indiana uses a flat tax rate of 3.23% on all income. This low rate makes Indiana one of the most tax-competitive states in the Midwest and attractive for both individuals and businesses.

Indiana Tax Features

• Low Flat Rate: 3.23% on all income - lowest in the region
• Simple Calculation: Easy to understand and calculate
• County Tax: Additional local county income tax may apply (usually 0.5-3%)
• Exemptions Available: Personal and dependent exemptions reduce taxable income

How Indiana Tax is Calculated

Indiana's tax system is straightforward:

1. Calculate total taxable income
2. Subtract personal exemptions ($1,000 per person for 2026)
3. Multiply by 3.23% for state tax
4. Add county income tax if applicable
5. Calculate federal tax separately

County Income Taxes

Important: This calculator shows only the state rate (3.23%). Most Indiana counties also impose a local income tax ranging from about 0.5% to 3%. Your total Indiana tax burden will be the state rate plus your county rate.

Frequently Asked Questions

What is Indiana's income tax rate?

Indiana has a flat state income tax rate of 3.23%. However, most counties also impose a local income tax, so your total Indiana tax rate will be higher (typically 3.7% to 6.2% combined).

Does Indiana tax Social Security?

No, Indiana does not tax Social Security retirement benefits, making it attractive for retirees.

What are county income taxes in Indiana?

In addition to the 3.23% state tax, Indiana counties can levy additional income taxes. These range from about 0.5% to 3% depending on the county. For example, Marion County (Indianapolis) has an additional 2.02% county tax.

How does Indiana compare to neighboring states?

Indiana's combined state+county tax (typically 3.7-6.2%) is very competitive: Illinois (4.95%), Michigan (4.25%), Ohio (up to 3.76%), and Kentucky (4.5%). Indiana is one of the lowest-tax states in the region.

Indiana vs. Neighboring States

State income tax comparison:

• Illinois: 4.95% flat rate
• Michigan: 4.25% flat rate
• Ohio: Progressive up to 3.76%
• Kentucky: 4.5% flat rate

Why Indiana's Low Tax Matters

Indiana's low 3.23% state rate provides savings:

• $50,000 income: Only $1,615 in state tax
• $100,000 income: Only $3,230 in state tax
• vs. Illinois ($100k): Save about $1,720/year

Tips for Indiana Taxpayers

• Remember to account for your county income tax
• Claim personal exemptions ($1,000 per person)
• Indiana doesn't tax Social Security - great for retirees
• Consider Indiana's overall affordability (low taxes + low cost of living)
• File electronically for faster refunds