Indiana's income tax rate is a flat 3.15 percent on wages and most other income

Indiana uses a flat income tax, meaning everyone pays the same percentage regardless of how much they earn. That rate is 3.15 percent of your federal adjusted gross income. This applies to wages, self-employment income, interest, dividends, and most other forms of income you report to the IRS.

The 3.15 percent is the state portion only. You will also owe federal income tax, which uses a different system with higher rates that increase as your income rises. Some Indiana counties and cities add their own income tax on top of the state rate — typically between 0.5 and 2.8 percent depending on where you live.

Indiana does not tax Social Security benefits, military pensions, or certain retirement income, which can make the state attractive to retirees. You will need to check your specific county and city to find your total local tax burden.

Key Takeaways

  • Indiana's state income tax is a flat 3.15 percent on all income levels, with no progressive brackets.
  • Your total income tax rate depends on your county and city, which may add 0.5 to 2.8 percent on top of the state rate.
  • Social Security, military pensions, and certain retirement income are not taxed by Indiana.
  • Sales tax in Indiana is 7 percent statewide, but counties can add up to 1 percent more for a total up to 8 percent.
  • Property tax rates vary widely by county and township, ranging from roughly 0.4 to 0.85 percent of assessed home value.

Sales tax: 7 percent statewide, plus local additions

Indiana's sales tax starts at 7 percent on most goods and services. This is the state portion. Many counties add their own sales tax — usually 0.25 to 1 percent — which means your total rate at checkout can range from 7 to 8 percent depending on where you shop.

Some items are exempt from sales tax in Indiana. Groceries (unprepared food you cook at home) are not taxed, but prepared food, restaurant meals, and snacks are. Prescription medications are exempt, but over-the-counter drugs are taxed. Clothing is taxed, as are most household goods.

If you buy something online from an out-of-state seller, Indiana sales tax may or may not explore depending on whether that seller has a physical presence in the state. Many large retailers now collect Indiana sales tax on all orders shipped to the state.

Property tax: Assessed value varies by county and township

Indiana property tax is calculated as a percentage of your home's assessed value, not its market value. The state assessment is typically 35 percent of what your home would sell for, though the actual percentage can shift. Your county assessor determines the assessed value, and you can challenge it if you believe it is too high.

The tax rate itself — called the levy — is set by your county and township and varies significantly. Rates generally fall between 0.4 and 0.85 percent of assessed value, but some areas run higher or lower. A home assessed at $100,000 in a county with a 0.6 percent rate would owe roughly $600 per year in property tax, though your actual bill will include school district levies and other local additions.

Property tax bills in Indiana are due in two installments: May 10 and November 10. If you own a home with a mortgage, your lender may collect property tax as part of your monthly escrow payment.

Corporate and business income tax

Indiana's corporate income tax rate is 5.5 percent on net business income. This applies to C corporations and certain other business structures. Sole proprietors and partners report business income on their personal tax returns and pay the 3.15 percent individual rate instead.

Self-employed individuals in Indiana owe both state income tax (3.15 percent) and federal self-employment tax (15.3 percent combined, though you can deduct half). You will also owe county and city income tax if your location has those taxes.

Excise taxes on fuel, alcohol, and tobacco

Indiana adds excise taxes — special taxes on specific goods — to gasoline, diesel, beer, wine, spirits, and cigarettes. The gasoline excise tax is 35 cents per gallon (as of 2024, though this can change). Cigarettes carry a tax of $1.105 per pack. Alcohol excise taxes vary by type: beer is taxed at roughly 12 percent of wholesale price, while spirits face a higher rate.

These taxes are included in the price you pay at the pump or register, so you do not pay them separately. They fund road maintenance, public health programs, and other state services.

How to find your exact local tax rate

Your total tax burden depends on which county and city you live or work in. The Indiana Department of Revenue website has a tax rate lookup tool where you can enter your address and see your state, county, and city income tax rates combined. For property tax, contact your county assessor's office directly — they can tell you your assessed value and the exact levy rate for your property.

If you move to Indiana or change jobs, your income tax withholding may change. Ask your employer's payroll department to recalculate based on your new address, or you can file a new W-4 form with the IRS to adjust how much tax is taken from each paycheck.

Frequently Asked Questions

Do I have to pay Indiana income tax if I work in Indiana but live in another state?

Yes. Indiana taxes income earned within the state, regardless of where you live. You may owe taxes to both Indiana and your home state, though you can usually claim a credit on one return to avoid paying twice on the same income.

Is there a state income tax on retirement accounts like 401(k)s and IRAs?

Withdrawals from 401(k)s and traditional IRAs are taxed as income at the 3.15 percent state rate, plus your local rate. Roth IRA withdrawals are not taxed. Indiana also exempts military pensions and certain other retirement income from state tax.

What happens if I disagree with my property tax assessment?

You can file a formal appeal with your county assessor's office, usually by a important date in May. You will need to show evidence that your home's assessed value is too high — comparable sales, recent appraisals, or documentation of needed repairs. The assessor will review your case and may adjust the value.

Are there any tax deductions or credits available to Indiana residents?

Indiana offers a standard deduction on your state return, similar to the federal return. The amount changes yearly. You may also may have access to for the Earned Income Tax Credit (EITC) if your income is below certain limits. Check the Indiana Department of Revenue website for current amounts and other credits.

Do I owe sales tax on services in Indiana?

Most services are not taxed in Indiana — haircuts, repairs, professional fees, and labor generally have no sales tax. However, some services like telecommunications and certain utilities do carry sales tax. When in doubt, ask the business before you pay.