Indiana Income Tax Calculator

Indiana state tax quick facts Income tax: 3.23% statewide flat rate, with additional county taxes up to 3.38% Sales tax: 7% Property tax: 0.87% average effective rate Gas tax: 42.9 cents per gallon of regular gasoline and 49.0 cents per gallon of diesel

Indiana’s statewide income tax has decreased twice in recent years. It went from a flat rate of 3.4% to 3.3% in 2015 and then down to 3.23% for 2017 and beyond. Those rates, taken alone, would give Indiana some of the lowest income taxes in the country, but Indiana counties also levy their own income taxes in addition to the state tax. This lifts the total rate in some places to more than 6.5%.

In addition to those income taxes, the state of Indiana assesses a statewide sales tax of 7%. That’s the second-highest state rate but only the 22nd-highest when you factor in local sales taxes in other states (Indiana does not collect any local sales taxes). Local governments collect property taxes, with county-level effective rates ranging from 0.37% up to 1.150%. Below, we’ll dig into the details on all taxes, rates and rules you’ll encounter in the Hoosier State.

Indiana Income Tax

Indiana has a flat state income tax rate of 3.23% for the 2018 tax year, which means that all Indiana residents pay the same percentage of their income in state tax. Unlike the federal income tax system, rates do not vary based on income level. Rates do vary, however, based on geography. Indiana’s 92 counties levy their own income taxes in addition to the state, with rates ranging from 0.20% up to 3.38%. Counties charge the same tax rate for residents and non-residents. The table below shows the income tax rates for all 92 Indiana counties. Note that these rates are paid in addition to the state rate of 3.23%.

Taxes should be withheld from a taxpayer’s paychecks throughout the year at a rate equal to the total of the state and county rate, but you’ll still need to file a state income tax return come tax season. The one exception: If your annual income is less than the amount you can claim in exemptions you don't have to file a return. So if you’re eligible for a total of $3,000 in exemptions and your taxable income is $3,000 or less, then you do not need to file a state income tax return in Indiana.

There is no standard deduction in Indiana, but taxpayers may still claim itemized deductions on their Indiana state income tax return. Some of the expenses and types of income that may be deducted in Indiana are home insulation installations (weather stripping, double pane windows, storm doors, etc.), Indiana lottery winnings and renter’s deduction. The renter’s deduction can be as much as $3,000 but is only available to people who pay rent on their principal residence and live in a building or home that is subject to Indiana property tax.

Indiana Tax Credits

There are also a number of notable tax credits in Indiana. Taxpayers who have made a donation to an Indiana college or university in the past year may claim a credit of the lesser of $100 or half of the amount donated. The Indiana earned income tax credit is available to taxpayers who claim an earned income tax credit on their federal tax return. Lastly, the Automatic Taxpayer Refund (ATR) credit is a credit given to all taxpayers when there is a significant surplus in the Indiana state budget. This credit was last given in 2013, with all taxpayers receiving $111.

Indiana Sales Tax

Unlike most other states, there are no local sales tax rates in Indiana, so wherever you go in the Hoosier State you will pay the same rate of 7%. That rate applies to goods or tangible personal property (like electronics, clothing and furniture) but does not apply to most services. Many types of food are exempt from sales tax, including most items you would buy at a grocery store. Soft drinks, candy and other sweets, however, are not exempt.

Indiana Property Tax

Property taxes in Indiana are relatively low, especially in comparison to other states in the region. Homeowners in Indiana pay an average of $1,130 in property taxes annually, 10th lowest in the country. (Contrast that with neighboring Illinois, where the average property tax bill is more than $4,000.) The average effective property tax rate in Indiana is 0.87%.

By state law, property tax collections on primary residences and surrounding property up to one acre are capped at 1% of a home’s market value. There are also a number of property tax deductions available in Indiana.

The Homestead Standard Deduction reduces the taxable property value by the lesser of $45,000 or 60%. The Supplemental Homestead Deduction then reduces taxable value by 35% of the first $600,000 in value and by 25% on any value above $600,000. For example, let’s say you have a house that is worth $300,000. The Homestead Standard Deduction will reduce your taxable property value by $45,000 (since 60% of $300,000 would be more than $45,000). That brings your taxable value to $255,000 ($300,000 minus $45,000) and then the Supplemental Homestead Deduction will further reduce your taxable value by $89,250 (35% of $255,000). Your final taxable property value would be $165,750; the property tax rate will apply to this value.

You can also claim a deduction for solar energy, wind power, geothermal and hydroelectric installations. Homeowners with a mortgage can claim a deduction for the lesser of $3,000, one half the assessed home value or the mortgage balance.

Low property taxes in Indiana can help ease some of the stress that comes with the process of buying a home. If you are thinking about buying a home in Indiana or are looking to refinance your current home loan, you should check out our comprehensive Indiana mortgage guide.

Calculate Your Property Taxes: Indiana Property Tax Calculator

Indiana Inheritance Tax

The Indiana inheritance tax was repealed as of December 31, 2012. For individuals who die after that date, no inheritance tax is due on payments from their estate.

Indiana Cigarette Tax

Indiana collects taxes on cigarettes equal to 99.5 cents per pack of 20 cigarettes. That is the 13th lowest rate in the country, but it could go up - in recent years, Indiana lawmakers considered raising the tax by $1.

Indiana Fireworks Tax

While certain types of fireworks are legal in Indiana, they are subject to a 5% public safety fee. This is on top of the 7% sales tax.

Photo credit: flickr

While the exact meaning and source of the term “Hoosier” is unknown, the Indiana Historical Society has posited that it originated in the upland South as a derogatory term for roughnecks. The Indianapolis 500 consists of 200 2.5 mile laps. The record for a single lap is 37.895 seconds, an average of over 225 miles per hour.