Indiana income tax rate for 2026: state and county tax

Indiana has one income tax rate for everyone, with no brackets. The Department of Revenue (DOR) gives the 2026 rate as 2.95% of Indiana adjusted gross income and says it drops to 2.9% for 2027; for 2025 it was 3%. A 2025 law, Senate Enrolled Act 451, allows further cuts of 0.05 percentage point at a time starting in 2030, but only if state revenue meets growth targets written into the law.

The starting point is your federal adjusted gross income from Form 1040. Indiana adds back a few items, subtracts its own deductions and exemptions, and taxes the rest at the flat rate; the return has no standard deduction. County income tax is then figured on the same amount at your county’s rate, so for a full-year resident state and county tax together come to 3.45% to 5.95% of Indiana adjusted gross income in 2026, before credits.

For example, a single Marion County resident with $60,000 of federal adjusted gross income and no other Indiana adjustments subtracts the $1,000 personal exemption, leaving $59,000. For 2026 that is $1,740.50 of state tax at 2.95% and $1,191.80 of Marion County tax at 2.02%, or $2,932.30 in all before credits and withholding.

All 92 Indiana counties levy a local income tax, which you pay on your state return. For 2026 the rates run from 0.5% in Porter County to 3% in Randolph County. DOR lists every county in Departmental Notice #1, its withholding chart, which can change in January and October; the version effective October 1, 2026 changed only Boone County, to 1.71%.

Six counties raised their rates on January 1, 2026: Carroll, Grant, Greene, Howard, Shelby and Union. Union went from 2% to 2.75% and Howard from 1.95% to 2.35%. The rate you use on your return is the one printed on the back of that year’s Schedule CT-40. When a county changes its rate on October 1, the rate for that year is three-quarters of the old rate plus one-quarter of the new one, and the new rate applies in full the next year.

Residents owe the tax for the county where they lived on January 1, on all their Indiana adjusted gross income, even if they move or change jobs later in the year. Someone who lived outside Indiana on January 1 but whose main place of work or business was in an Indiana county owes that county’s tax, at the same rate, on the income earned there. Residents figure it on Schedule CT-40, part-year residents and nonresidents on Schedule CT-40PNR, and employers withhold it along with state tax.

Under the 2025 instructions, a full-year resident must file if gross income, the total of all income before deductions, is more than total exemptions: $1,000 each for you, your spouse on a joint return and each dependent. A part-year resident files if they had income while living in Indiana, and a nonresident files if they had Indiana-source income other than certain interest, dividends and retirement income. Filing can still be worth it to get back Indiana tax withheld or to claim a refundable credit.

Returns for 2026 are due April 15, 2027. A federal extension automatically extends the Indiana return; without one, you request an Indiana extension on Form IT-9 or online by the due date. The Indiana extension runs one month past the federal one, which makes it November 15, 2027 for 2026 returns; for 2025 returns it was November 16, 2026. It is only an extension to file: interest runs from April 15, and the late-payment penalty is waived only if you paid at least 90% of the tax by the original due date and file and pay the rest, with interest, by the extended date.

For 2026, estimated tax is required if you expect to owe $1,000 or more in state and county tax that withholding will not cover, such as on self-employment or investment income. The 2026 installments are due April 15, June 15 and September 15, 2026, and January 15, 2027. Under the 2025 instructions, you avoid the underpayment penalty if timely payments cover 90% of this year’s tax or 100% of last year’s, or 110% of last year’s tax if last year’s federal adjusted gross income was over $150,000 ($75,000 if married filing separately).

Indiana has no standard deduction; it subtracts exemptions instead. Under the law for 2025 and 2026, you get $1,000 each for yourself, your spouse and each dependent. A dependent child under 19, or a full-time student under 24, adds $1,500, or $3,000 in the first year the child qualifies, and an adopted child adds another $3,000. You and your spouse each add $1,000 at 65 or older and $1,000 if blind, plus $500 more at 65 or older if federal adjusted gross income is under $40,000 ($20,000 if married filing separately).

Indiana does not tax Social Security or railroad retirement benefits: whatever is taxable on the federal return is deducted. Active-duty military pay is fully deductible from 2024, National Guard and reserve pay from 2023, and military retirement and survivor’s benefits from 2022.

Two credits help at lower incomes. For 2025, Indiana’s earned income credit is 10% of your federal earned income credit and is refundable; you must qualify for and claim the federal credit, and DOR says Indiana follows all federal requirements and allowances for 2025. For 2025, the Unified Tax Credit for the Elderly is for residents 65 or older with federal adjusted gross income under $10,000, and it is $40 to $140, depending on income and whether one or both spouses qualify.

The July 2025 tax law (Public Law 119-21) created federal deductions, for 2025 through 2028, for qualified tips, qualified overtime pay, interest on loans for certain new vehicles and an extra $6,000 for people 65 and older. Federal filers take them after adjusted gross income, and the Indiana return starts from federal adjusted gross income, so on their own they never reach an Indiana return.

Indiana’s 2026 tax law, Senate Enrolled Act 243, updated Indiana’s reference to the federal tax code to January 1, 2026, and for tax year 2026 only it adds Indiana deductions for qualified tips, overtime and car loan interest equal to the amounts deducted on the federal return. The deductions lower county tax as well as state tax. A nonresident deducts only the share of tips or overtime that Indiana taxes, and the car loan deduction covers only interest paid while you were an Indiana resident.

Indiana has no version of the federal deduction for people 65 and older; its own age 65 exemptions apply instead. For 2025, Indiana kept following the federal tax code as of January 1, 2023, apart from a few adoption, health savings account and energy property provisions, so the new federal deductions do not change a 2025 Indiana return. DOR says the 2026 deductions are in place for the 2026 tax year only.

Indiana has reciprocal agreements with five states: Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. They cover only wages, salaries, tips and commissions. An Indiana resident who works in one of them pays Indiana tax on that pay as if it were earned in Indiana; if the employer withholds the other state’s tax, you claim it back from that state, because Indiana gives no credit for it.

The agreements do not cover local income taxes. An Indiana resident who works in those states still owes county tax for the county where they lived on January 1, and if a city or county there taxes the wages, such as a city income tax in Ohio or Kentucky, Indiana gives a credit for that local tax against the county tax, up to the county tax on the same income.

Residents of the five states who work in Indiana owe no Indiana state tax on their wages, but they do owe county tax if their main place of work on January 1 was in an Indiana county, at that county’s rate and with no exemptions. They file Form IT-40RNR if wages were their only Indiana income, or Form IT-40PNR if they had other Indiana income, such as business or rental income or Indiana casino winnings.

Illinois and Indiana have no reciprocal agreement. Illinois’s agreements are with Iowa, Kentucky, Michigan and Wisconsin, and DOR lists Illinois among the states with no agreement with Indiana. So wages earned in one state by a resident of the other are taxed by both, and the home state gives a credit.

If you live in Indiana and work in Illinois, Illinois taxes those wages at its 2026 rate of 4.95%, and you file Form IL-1040 with Schedule NR as a nonresident. Illinois gives nonresidents no credit, so the credit comes from Indiana, limited to the Indiana tax on the same income, at 2.95% for 2026. Because Illinois’s rate is higher, the credit usually cancels the Indiana state tax on those wages, but not the county tax for the county where you lived on January 1. DOR says an Illinois employer with a business connection to Indiana must withhold that county tax; if yours does not, you may need estimated payments.

If you live in Illinois and work in Indiana, Indiana taxes those wages at 2.95% for 2026 on Form IT-40PNR, plus county tax if your main place of work on January 1 was in an Indiana county, such as 1.5% for 2026 in Lake County, Indiana. Illinois taxes all your income, and its Schedule CR credit covers income tax paid to another state or to its counties and cities, so it can take in both the Indiana state and county tax on the same income. Pay for days you work from home in Illinois is not Indiana income, and since 2024 a nonresident employee who works in Indiana 30 days or fewer in a year owes no Indiana state or county tax on that pay, with exceptions such as professional athletes, entertainers and public figures.

In the year you move, you file Form IT-40PNR as a part-year resident. Indiana taxes everything you received while you lived in Indiana, plus Indiana-source income from the rest of the year, such as pay for work done in Indiana, and your exemptions are reduced in proportion to the share of your income Indiana taxes. You are a full-year resident only if your legal residence was in Indiana from January 1 through December 31, and DOR may ask a nonresident for proof, such as a driver’s license or proof of home ownership.

County tax follows your January 1 status. If you move to Indiana after January 1 and did not work in an Indiana county on that date, you owe no county tax for that year. If you lived in an Indiana county on January 1 and move away, you owe that county’s tax on your Indiana taxable income for the year, and a move between Indiana counties counts only from the next January 1.

The other state applies its own rules. Illinois requires a part-year resident to file Form IL-1040 with Schedule NR, and its Schedule CR instructions show a couple who moved from Indiana to Illinois in April and kept working in Indiana, claiming Illinois credit only for the share of their Indiana tax on wages earned after the move. And Indiana’s 30-day rule for short-term workers does not apply to anyone who was an Indiana resident for any part of the year.