Overview of Indiana Taxes
The Hoosier state has a flat tax rate, meaning you’re taxed at the same 3.3% rate regardless of your income level or marital status. There is a tax rate cut planned in 2017. All 92 counties in Indiana charge local taxes. Residents are taxed a local rate in addition to state taxes, which could bring up the total Indiana income tax rate to over 6%, depending on where they live.
This calculator reflects the 2018 federal withholding tax changes.
Click here to learn more about how the Trump Tax Plan will affect you.
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Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Indiana Paycheck Quick Facts
How Your Indiana Paycheck Works
Employers will withhold federal and FICA taxes from your paycheck. Medicare and Social Security taxes together make up FICA taxes. Employers withhold 1.45% in Medicare taxes and 6.2% in Social Security taxes per paycheck, and also match this amount for a total contribution of 2.9% and 12.4% respectively. Note that if you are self-employed, you need to pay that total yourself. Additionally, wages that exceed $200,000 are subject to a 0.9% Medicare surtax.
The IRS receives the federal taxes withheld from your wages and puts them toward your annual income taxes. The amount of federal taxes taken out depends on the information you provided on your W-4 form. Remember whenever you start a new job or need to make changes, you’ll need to fill out a new W-4. How many allowances you are eligible for and how many you claim on your W-4 affects how much you will pay in taxes each pay period.
In December 2017, President Trump signed a new tax plan into law. The IRS has since released updated tax withholding guidelines and taxpayers should have seen changes to their paychecks, to reflect the new tax plan, starting in February 2018. For the time being, taxpayers do not need to fill out a new W-4. Employers will use the withholdings on your current form.
Your marital status is one factor that affects your allowances and also your filing status (whether you are married and file jointly or separately). If you have qualifying dependents that also plays a role in how many allowances you can claim. The more allowances you take, the less you will pay in taxes and the bigger your paychecks will be, but be very careful about claiming too many allowances and underpaying your taxes all year long. If you do this, you will be hit with a big bill come April and you could even face penalties for underpaying.
It’s also worth noting that if you have more than one job, you cannot claim the same allowances for both. So say for example you have two allowances that you want to claim and also two jobs. You can claim one allowance for each job or you could claim both with one job and none for the other.
Indiana Median Household Income
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Residents of Indiana are taxed at a flat state income rate of 3.23%. That means no matter how much you make, you’re taxed at the same rate.
All counties in Indiana impose their own local income tax rates in addition to the state rate that all employees must pay. Indiana counties’ local tax rates range from 0.35% to 3.38% for residents and non-residents. Check out the table provided below for Indiana county tax rates for residents and nonresidents. If you are thinking about becoming a resident of the Hoosier State, our Indiana mortgage guide can help answer a lot of the questions you may have about getting a mortgage in Indiana, with information about rates and details specific to each county.
Indiana Local Tax Rates
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How You Can Affect Your Indiana Paycheck
If you received a large tax refund or if you were hit with a massive tax bill when you filed your income taxes, you may want to consider changing your withholdings on your W-4. If you owed a lot in taxes, you may be claiming too many allowances. This is an easy fix as you can fill out a new W-4 with fewer allowances. Alternatively, you can have a dollar amount withheld from every paycheck. You can do this by specifying how much you want taken out of each paycheck on the correct line on your W-4.
If you think your paychecks are on the small side and you received a large refund at tax time, you can look into whether there are additional allowances that you can claim. Some people may like getting a big refund every April, but others may prefer to have access to that money throughout the year or to have the choice to invest and possibly grow that money for a year. If you are consistently over-paying your taxes, that’s like giving Uncle Sam a tax-free loan each year.
Pre-tax contributions are another factor that affect the size of your take-home pay. You can actually lower your taxable income by taking advantage of certain benefits that your employer may offer. For example, if you have the option of putting money into a 401(k) or 403(b) retirement account, or a Health Savings Account or Flexible Spending Account, that money will come out of your paycheck pre-tax and could help lessen how much you owe to Uncle Sam.
Indiana Top Income Tax Rate
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Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2016 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics