Indiana Tax Calculator 2026

Q: What is Indiana's income tax rate in 2026?

Indiana has a flat state income tax rate of 3.05%, one of the lowest flat rates in the nation. However, Indiana is unique in that all 92 counties levy their own additional income tax, ranging from 0.5% to 2.96%. The combined state and county rate typically ranges from 3.55% to 6.01%, with most counties adding about 1% to 2%.

Q: What are Indiana's county income taxes?

All 92 Indiana counties impose a local income tax on top of the 3.05% state rate. Rates vary widely: the lowest county rates are around 0.5%, while the highest (in Pulaski County) is 2.96%. Most counties fall in the 1% to 2% range. The county tax is based on your county of residence as of January 1 of the tax year, not where you work.

Q: What is Indiana's sales tax rate?

Indiana has a flat 7% state sales tax with no additional local taxes. This uniform rate applies statewide, making Indiana one of the simpler states for sales tax compliance. Most food purchased for home consumption is exempt from sales tax, as are prescription drugs. Indiana does not hold sales tax holidays.

Q: Does Indiana tax retirement income?

Indiana taxes most retirement income at the flat 3.05% state rate plus county taxes. Social Security benefits are fully exempt from state tax. Military retirement pay is also exempt. Indiana provides a $6,000 deduction for certain qualified pension and retirement income for individuals receiving payments from an employer's qualified plan. There is no age requirement for this deduction.

Q: What is Indiana's property tax rate?

Indiana's effective property tax rate is approximately 0.81%, near the national average. Indiana has constitutional caps on property tax rates: 1% of assessed value for homesteads, 2% for residential rental and farmland, and 3% for commercial property. These caps, enacted through a 2010 constitutional amendment, provide predictable limits on property tax burdens.

Indiana Tax Calculator

Annual Gross Income ($)

Filing Status

Income Tax
3.05%
flat + county tax
Sales Tax
7.0%
flat statewide
Property Tax
0.81%
capped at 1%

Indiana Income Tax

Indiana has a flat state income tax rate of 3.05%, making it one of the lowest state-level income tax rates in the nation. The rate has been gradually declining from 3.4% in 2014, with planned reductions that have brought it to its current level. Indiana is one of only a handful of states with both a flat income tax rate and a simple, straightforward calculation method.

However, Indiana's income tax picture is complicated by its mandatory county income taxes. All 92 Indiana counties levy their own income tax on top of the state rate. County rates range from 0.5% in several counties to 2.96% in Pulaski County. The most populated counties have the following rates: Marion County (Indianapolis) charges 2.02%, Lake County (Gary/Hammond) charges 1.5%, Allen County (Fort Wayne) charges 1.48%, Hamilton County (Carmel/Fishers) charges 1.0%, and St. Joseph County (South Bend) charges 1.75%. Your county tax is determined by your county of residence on January 1 of the tax year.

Indiana uses its own adjusted gross income calculation that starts with federal AGI and makes several modifications. The state provides a $1,000 personal exemption per person (in addition to dependent exemptions of $1,500 each), a $3,000 rental deduction, and various other adjustments. Indiana does not conform to the federal standard deduction or itemized deductions; it uses its own exemption system instead.

Indiana Sales Tax

Indiana has a flat 7% sales tax that applies uniformly statewide with no local additions. This makes Indiana one of the simplest states for sales tax compliance. The 7% rate is among the higher state rates in the country, tied with Mississippi and Tennessee for the highest single state rate (though Tennessee's combined rate with locals is higher).

Indiana exempts most unprepared food (groceries) from sales tax, which is a significant benefit for residents. Prescription medications are exempt, as are medical equipment and prosthetics. Clothing is fully taxable. Indiana does not hold sales tax holidays. The state requires businesses with economic nexus (more than $100,000 in annual sales to Indiana customers) to collect and remit sales tax, including online retailers.

Indiana Property Tax

Indiana's effective property tax rate is approximately 0.81%, close to the national average. What makes Indiana unique is its constitutional property tax caps, enacted through a 2010 amendment. These caps limit property taxes to: 1% of assessed value for homesteads, 2% for residential rental and agricultural property, and 3% for commercial and industrial property. These caps provide a firm ceiling on property tax burdens regardless of local tax rates.

Indiana offers a standard homestead deduction of the lesser of 60% of assessed value or $48,000. An additional supplemental deduction applies to the remaining assessed value (35% on the next $600,000, 25% above $600,000). For seniors aged 65 and older with income below $30,000 (single) or $40,000 (married), Indiana provides an additional over-65 deduction. The combination of caps and deductions means that many Indiana homeowners pay significantly less in property tax than the gross tax rate would suggest.

Indiana County Income Taxes: A Unique System

Indiana's county income tax system is unusual in American tax policy. While other states have local income taxes in specific cities (like New York City or Philadelphia), Indiana is the only state where every county levies its own income tax. The county rates are set by county councils and can be adjusted periodically, though they must be adopted by October 31 for the following year.

County income tax revenue funds local services including public safety, roads, and local government operations. Some counties also use their income tax to fund economic development, libraries, and transit systems. For Indianapolis/Marion County, the 2.02% county rate effectively doubles the income tax paid by residents compared to the state rate alone. This means an Indianapolis resident earning $80,000 pays approximately $2,440 in state tax plus $1,616 in county tax, for a total of about $4,056 in state/local income tax.

The county where you pay tax is determined by your residence on January 1, not where you work. Indiana does not provide credits for county taxes paid in one county if you move to another during the year. If you live in Indiana but work in another state, you may be eligible for a credit against other state taxes paid.

Indiana's Business Climate

Indiana consistently ranks as one of the most business-friendly states in the nation. The low flat income tax rate, combined with a 4.9% corporate income tax rate (reduced from 8.5% in 2012), makes Indiana attractive for business relocation. The state has no inventory tax, no gross receipts tax, and provides significant tax incentives for manufacturing, technology, and logistics companies. Major employers like Eli Lilly, Salesforce, Cummins, and the motorsports industry benefit from Indiana's competitive tax structure.

Indiana vs. Neighboring States

Illinois — Illinois has a flat 4.95% income tax with no local income tax (except Chicago doesn't have one). Sales tax averages 8.83%, and property tax is very high at 2.07%. Indiana's lower income tax rate and much lower property taxes make it significantly more affordable. Many Illinois border residents commute from Indiana for tax savings.
Ohio — Ohio has graduated income tax up to 3.5% (recently reduced from 3.99%). Ohio has no county income tax (except in some cities). Sales tax averages 7.24%. Property tax is 1.53%. Indiana's combined state/county income tax is often higher than Ohio's graduated rates, but Indiana has lower property taxes.
Michigan — Michigan has a flat 4.25% income tax plus some city taxes (Detroit 2.4%). Sales tax is 6.0%. Property tax is 1.32%. Indiana's state rate is lower, but county taxes can make the total comparable. Indiana has lower property taxes.
Kentucky — Kentucky has a flat 4% income tax. Sales tax is 6%. Property tax is 0.80%, similar to Indiana. Indiana's state rate is lower, but county taxes make the combined rate comparable to Kentucky's.

Frequently Asked Questions

What is Indiana's income tax rate in 2026?

Indiana's flat state income tax rate is 3.05%. However, all 92 counties add their own income tax, ranging from 0.5% to 2.96%. The combined state and county rate typically ranges from 3.55% to 6.01%, depending on your county of residence.

What are Indiana's county income taxes?

All 92 counties impose a local income tax. Major county rates include Marion County (Indianapolis) at 2.02%, Lake County at 1.5%, Allen County at 1.48%, and Hamilton County at 1.0%. The tax is based on your county of residence as of January 1.

What is Indiana's sales tax rate?

Indiana has a flat 7% state sales tax with no local additions. Groceries (unprepared food) are exempt. The rate is uniform statewide, making compliance straightforward for businesses and consumers.

Does Indiana tax retirement income?

Most retirement income is taxed at the flat 3.05% rate plus county taxes. Social Security and military retirement pay are exempt. Indiana provides a $6,000 deduction for qualified pension and retirement income.

What is Indiana's property tax rate?

The effective rate is about 0.81%. Indiana's constitution caps property tax at 1% of assessed value for homesteads, 2% for rental/farm property, and 3% for commercial property. Generous homestead deductions further reduce the burden.