Indiana Paycheck Calculator & Income Tax Rates (2026)

Indiana taxes all taxable income at a single 2.95% rate. The only thing that changes your bill is the deduction that comes off the top first.

With a flat state rate the marginal state rate is constant, but the overall effective rate still rises because federal brackets are progressive.

Indiana's joint deduction are the same as single brackets, so the marriage effect here comes from the deduction and the federal side. On $100,000 a joint return keeps $80,104 versus $74,472 for a single filer.

Indiana taxes wages, business income, and investment income at a single flat rate, and the rate is still falling. A 2023 law set a step-down: 3.15% in 2023, 3.05% in 2024, 3.0% in 2025, 2.95% for tax year 2026, and 2.9% in 2027, where it is scheduled to settle. That is one of the three or four lowest headline rates of any state with a broad income tax, but the headline understates what Hoosiers pay, because every one of the state's 92 counties levies its own income tax on top, and in Indianapolis the county layer alone (2.02%) is nearly as large as the state tax. Indiana has taxed income at a flat rate since it adopted the tax in 1963. The return starts from federal adjusted gross income, offers no standard deduction and no federal-style itemizing, and is built instead around fixed exemptions and a short list of targeted deductions. The result is simple and low — just not as low as it looks.

There is no standard deduction. Each taxpayer and spouse gets a $1,000 personal exemption, each dependent $1,000 plus an additional $1,500 for a qualifying child, and those 65 or older or blind another $1,000. Indiana does not allow federal itemized deductions, but has its own list: a renter's deduction up to $3,000, a property tax deduction up to $2,500, and a 20% credit on 529 contributions up to $1,500. The state EITC is 10% of the federal credit.

All 92 Indiana counties levy a local income tax on the same income base as the state tax, at a rate set by the county where you lived on January 1 (or worked, for nonresidents). Rates run from about 0.5% to nearly 3%: Marion County (Indianapolis) is 2.02%, St. Joseph County 1.75%, and Lake County 1.5%. A 2025 law restructures the tax from 2028, capping the county rate at 2.9% and letting cities and towns levy their own share.

Indiana's sales tax is 7% statewide, and the state allows no local sales taxes — the rate is 7% in Gary, Evansville, and every rural crossroads alike. That is one of the highest state-level rates in the country, but with nothing stacked on top, the combined rate lands about where many states end up only after local add-ons. Unprepared groceries and prescription drugs are exempt; restaurant meals are taxed, and many counties add a 1–2% food-and-beverage tax.

Property taxes are low by national standards, with effective rates around 0.8% of market value, largely because Indiana's constitution caps a homestead bill at 1% of gross assessed value (2% for other residential property and farmland, 3% for commercial). A 2025 overhaul added a homestead credit worth 10% of the bill, up to $300, starting with taxes payable in 2026, and phases in a larger percentage-based homestead deduction through 2031. Lower-income seniors get an extra deduction.

Indiana does not tax Social Security or Railroad Retirement benefits, and since 2022 it has exempted military retirement pay. Beyond that it is less generous than its neighbors: pensions, 401(k) and traditional IRA withdrawals, and annuity income are taxed as ordinary income at the flat state rate plus the county rate — there is no general pension exclusion of the kind Kentucky or Michigan offer. Federal civil-service annuitants 62 and older can deduct up to $16,000 of their annuity, and taxpayers 65 and older get an extra $1,000 exemption, plus $500 more if federal AGI is under $40,000. A retiree drawing a $60,000 private pension in Marion County pays roughly 5% combined state and county tax on it.

High earners are the clearest winners: a $300,000 salary is taxed at the same 2.95% as a $30,000 one, and a county rate adds no bracket creep. Dual-income couples pay exactly what two singles would — no marriage penalty. Retirees are a mixed case: Social Security and military pay are untouched, but a private pension is fully taxed. Commuters from Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin owe no Indiana state tax under reciprocity, though they still owe county tax where they work. Illinois commuters get no reciprocity, and remote workers pay whichever county they live in.

The median household income in Indiana is $54,000, which is $43,078 a year ($3,590 a month) after all taxes. That is close to the national median. After adjusting for cost of living, the purchasing power of that take-home is equivalent to $47,864 in an average-cost area.

Indiana ranks #37 of 50 for raw take-home pay and #17 for cost-adjusted purchasing power at $100,000. The 20-place gap between the two reflects a below-average cost of living that boosts real purchasing power. The best state (Alaska) leaves $79,125; the worst (Oregon) leaves $70,932. Indiana is $4,653 behind the leader.

City and Local Income Tax Calculators in Indiana

Indiana Tax Questions, Answered

Compare Indiana with Other Midwest States

Specific Salaries in Indiana