Indiana Paycheck Calculator

Indiana has been reducing its flat income tax steadily. The rate stood at 3.23% as recently as 2022 and is legislated to continue falling toward 2.9% over the following years, subject to the state meeting revenue conditions.

Indiana offers no standard deduction. Instead it provides personal exemptions per taxpayer and dependant, which are fixed dollar amounts rather than percentages and have not kept pace with inflation. The practical effect is that Indiana taxable income sits close to gross pay, so a low headline rate does not translate into quite as small a bill as it first appears.

Still, on the state layer alone Indiana is genuinely cheap. The complication is entirely local.

Every Indiana county levies a local income tax, with rates that vary considerably — some sit near 0.5%, others exceed 3%. Combined with the state rate, a resident of a high-rate county can face close to 6%, more than double the state figure.

The determining date is unusual and catches people out: your county tax rate is set by where you resided on 1 January of the tax year, and it does not change if you move in February. If you lived in a low-rate county on New Year's Day and moved to a high-rate one the following week, you pay the low rate for that whole year — and vice versa.

If you live outside Indiana but work in an Indiana county, you may be subject to a non-resident county rate instead. Counties publish their rates annually through the Department of Revenue, and rates are revised more often than most people expect, so it is worth checking rather than assuming last year's figure still applies.

Indiana maintains reciprocal agreements with Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. If you live in one of those states and work in Indiana, Indiana does not tax your wages for state purposes — though county tax may still apply — and you file in your home state.

The reverse holds for Indiana residents working in those states. This matters a great deal around Chicago, Louisville and Cincinnati, where large numbers of people cross state lines daily. Illinois is notably absent from that list, so Indiana residents working in Illinois face a credit calculation rather than a clean exemption.

Indiana does not tax Social Security benefits. Military retirement pay is fully exempt, and there are deductions for certain other retirement income, making the state comparatively friendly to retirees despite the county layer.