Indiana has a flat state income tax rate of 3.05% on all adjusted gross income. This is one of the lowest flat tax rates in the nation. However, Indiana also has county income taxes that add to your total tax burden.
Indiana State Tax Rate
| Taxable Income | Tax Rate |
|---|---|
| All income | 3.05% |
Indiana's state rate has been gradually reduced from 3.23% and is scheduled to continue decreasing. These figures are based on Indiana Department of Revenue guidelines.
County Income Taxes
Unlike most states, Indiana allows counties to impose their own income taxes. All 92 Indiana counties levy a county income tax, ranging from 0.5% to 3.38%.
| County | County Tax Rate | Combined Rate |
|---|---|---|
| Marion (Indianapolis) | 2.02% | 5.07% |
| Lake (Gary) | 1.50% | 4.55% |
| Allen (Fort Wayne) | 1.48% | 4.53% |
| Hamilton (Carmel) | 1.00% | 4.05% |
| Pulaski (highest) | 3.38% | 6.43% |
County tax is based on where you live, not where you work. If you live in Marion County but work in Hamilton County, you pay Marion County's 2.02% rate.
What You'll See on Your Paystub
An Indiana worker's paystub includes federal income tax withholding, state tax, and county tax:
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | Varies | Based on W-4 and income |
| Social Security | 6.2% | Up to $181,200 wage base |
| Medicare | 1.45% | No wage limit |
| Indiana State Income Tax | 3.05% | Flat rate on all income |
| County Income Tax | 0.5% - 3.38% | Based on county of residence |
Indiana Exemptions
Indiana provides exemptions that reduce your taxable income:
| Exemption Type | Amount (2026) |
|---|---|
| Personal Exemption | $1,000 |
| Dependent Exemption | $1,500 each |
| Additional 65+ Exemption | $1,000 |
| Blind Exemption | $1,000 |
Reciprocity Agreements
Indiana has income tax reciprocity agreements with several states:
- Kentucky: Indiana residents working in Kentucky pay only Indiana tax
- Michigan: Indiana residents working in Michigan pay only Indiana tax
- Ohio: Indiana residents working in Ohio pay only Indiana tax
- Pennsylvania: Indiana residents working in Pennsylvania pay only Indiana tax
- Wisconsin: Indiana residents working in Wisconsin pay only Indiana tax
If you live in Indiana and work in one of these states, file Form WH-47 with your employer to have only Indiana taxes withheld.
Retirement Income
Indiana offers some tax benefits for retirees:
- Social Security benefits are fully exempt
- Military retirement pay is fully exempt
- Railroad retirement benefits are exempt
- Other pension income is generally taxable
Indiana vs. Neighboring States
| State | State Rate | Local Taxes? |
|---|---|---|
| Indiana | 3.05% | Yes (0.5% - 3.38%) |
| Illinois | 4.95% | No |
| Ohio | 0% - 3.5% | Yes (many cities) |
| Michigan | 4.25% | Some cities |
| Kentucky | 4.0% | Some cities |
Comparing Take-Home Pay
Here's how a $75,000 annual salary in Indiana (Marion County) compares to other states:
| State/Location | Effective Rate | Annual State/Local Tax |
|---|---|---|
| Indiana (Marion Co.) | ~4.9% | ~$3,650 |
| Indiana (Hamilton Co.) | ~3.9% | ~$2,900 |
| Illinois | ~4.8% | ~$3,480 |