Indiana state taxes at a glance
| Individual income tax | Flat-rate income tax |
|---|---|
| Rate structure | A flat state income tax rate of 2.95% for 2026, scheduled to fall to 2.9% in 2027, plus a separate county income tax based on where you live. Verify current-year figures. |
| Tax agency | Indiana Department of Revenue (DOR) |
| Main individual return | Form IT-40 (full-year residents); Form IT-40PNR (part-year and nonresidents) |
| Local income taxes | County income taxes apply on top of the state tax, based on your county of residence on January 1 (or, for nonresidents, the county of principal employment). Rates vary by county. |
| Sales tax | A flat 7% statewide rate with no local sales taxes, so the rate is the same in every county. |
| Property tax | Constitutional caps limit property tax bills to 1% of assessed value for homesteads, 2% for other residential and farmland, and 3% for business property; local levies above the caps are not collected. |
| Retirement & Social Security | Indiana does not tax Social Security. Other retirement income is generally taxable, with possible deductions for certain pensions; check DOR guidance. |
Verify current-year figures: state rates, brackets, credits and filing rules change. Treat this page as a starting orientation and confirm details on the Indiana Department of Revenue (DOR) website.
How Indiana income tax works
Indiana’s state income tax is a flat 2.95% for 2026, down from 3% in 2025 under legislation passed in 2023, according to Tax Foundation. State law schedules a further reduction to 2.9% on January 1, 2027, and 2025’s SB 451 allows additional reductions in even-numbered years from 2030 if revenue conditions are met. Check the DOR’s rate page for the year you are filing, because the schedule has changed with revenue forecasts.
The state rate is only part of an Indiana income tax bill. Each county levies its own income tax on residents, and the rate depends on where you lived on January 1 of the tax year, regardless of where you moved later. Nonresidents who work in Indiana owe the county tax for their county of principal employment. The DOR publishes an annual county-rate chart, and the combined state and county rate can be several percentage points. Tax Foundation counts Indiana among states with meaningful local income taxes. Indiana’s personal exemption is $1,000 per person, with extra amounts for dependents, and there is no state standard deduction, so the structure differs from the federal return.
Property tax in Indiana is limited by constitutional caps, sometimes called the circuit breaker: bills cannot exceed 1% of assessed value for homesteads, 2% for other residential and farmland, and 3% for business property. The state sales tax is 7% everywhere with no local add-ons, per Tax Foundation’s mid-2026 data. For commuters, Indiana offers income-tax reciprocity with Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin, which means residents of those states who work in Indiana generally owe tax only to their home state.
Filing your Indiana return and free options
Eligible Hoosiers can file federal and Indiana returns free through INfreefile, which is available only when accessed through the official Indiana DOR Free File page. The DOR’s INTIME portal handles payments by credit card or ACH but is not used to file an individual return, so use INfreefile, approved software or a paper IT-40. The IT-40 forms currently listed are for tax year 2025.
Because the county tax depends on your January 1 residence, double-check the county you enter and the county rate on the DOR chart; errors there are among the more common state return mistakes. Our free filing hub explains how to pair state and federal options, and state refund status explains what to expect afterward.
For the federal side, see our guides to free federal filing options and the complete guide to filing taxes.
Things Indiana residents often ask about
- County tax is residence on Jan. 1: moving mid-year does not change the county tax rate for that year.
- Reciprocity: Indiana has agreements with Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin; commuters from those states generally file in their home state only.
- No state standard deduction: Indiana uses exemptions instead, so federal deduction choices do not carry over directly.
- Circuit-breaker caps: property tax bills are capped by category, but local governments can still raise levies within the caps.
- INTIME is for payments: use INfreefile or approved software to file your return.
Official Indiana links
- Indiana Department of Revenue
- Indiana DOR: INfreefile
- Indiana DOR: rates, fees and penalties
- Federation of Tax Administrators: State tax agencies
Frequently asked questions
What is the Indiana income tax rate?
The state rate is a flat 2.95% for 2026, with a reduction to 2.9% scheduled for 2027, plus a county income tax that varies by county.
How do I pay Indiana county income tax?
You report it on your IT-40 based on the county where you lived on January 1 (or where you worked, if you are a nonresident). The DOR publishes a county rate chart each year.
Is there free state filing in Indiana?
Yes. INfreefile offers free federal and Indiana filing to eligible taxpayers who start from the Indiana DOR Free File page.
General information only — not tax, legal or financial advice. Tax figures change every year; verify the current numbers at IRS.gov or with a qualified professional. Read the full disclaimer.