Indiana State Taxes
Quick Tax Facts
- Income Tax: 3.23%
- State Sales Tax: 7%
- Median Property Tax: $1,051
Indiana is known as the “Crossroads of America” due to its central location. And just like its geographic nickname, it’s also middle of the pack when it comes to taxes, at least for sales and property taxes. According to Kiplinger, however, Indiana is not very tax-friendly to the middle class or retirees. Although the state’s flat income tax rate is on the modest side, it can get very expensive when adding in the various local income taxes.
Indiana Income Tax
Indiana currently has a flat income tax rate of 3.23%. In 2022, Governor Eric Holcomb signed into law HB 1002, which effectively lowers the income tax rate to 3.15% for tax years 2023 and 2024. Beginning in 2025, the tax rate will continue to decrease if budget conditions are met until it reaches 2.9% by 2029.
All 92 of Indiana’s counties impose a county income tax on residents and non-residents with a place of business or employment in the county. Indiana counties may also impose a local income tax rate of no more than 0.2% for emergency medical services. This additional tax can only be in effect for a maximum of 25 years.
Who Must File?
You may need to file an Indiana income tax return if you lived in the state and received income, or you had income from an Indiana source but resided elsewhere.
Full-year residents generally should file (Form IT-40) if they have an income of $1,000 or more, or if the total of all income before deductions were more than the total exemptions claimed.
Part-year residents and non-residents must file a return (IT-40PNR) if any of the following are true:
- While living in Indiana you received income from any source
- While living outside of the state, you received income from an Indiana source
Full-year residents of Michigan, Kentucky, Ohio, Wisconsin, or Pennsylvania who receive wages, salaries, tips, or commissions from an Indiana source must file IT-40RNR.
Indiana Sales Tax
Since April 1, 2008, Indiana’s state sales tax rate has been 7%. Counties and cities do not collect local sales tax. Although its state sales tax rate is the second-highest in the country, it ranks near the middle (24th) when compared to other overall sales tax rates.
Indiana Property Taxes
Indiana levies property taxes at the county level. Property taxes are paid in two installments annually – one on May 10 and the other on November 15. The amount you owe is determined by the assessed value of your property (minus any deductions) multiplied by your local property tax rate.
The median property tax in Indiana is $1,051 annually. Hamilton County has the highest property tax at an average of $2,274. The lowest amount is $515 in Orange County.
Indiana Tax Holidays
There are no tax holidays scheduled in Indiana at this time. A bill was introduced in 2022 that would create a tax-free weekend annually in the state, but it failed to pass.
Indiana Tax Resources
If you need assistance preparing your Indiana state taxes, you can speak with a tax professional from Tax Defense Network by calling 855-476-6920.
You can also visit the Indiana Department of Revenue website for additional resources.