Overview of Indiana Taxes
Indiana has a flat tax rate, meaning you’re taxed at the same 3.23% rate regardless of your income level or filing status. All 92 counties in the Hoosier State also charge local taxes. These local taxes could bring your total Indiana income tax rate to over 6.00%, depending on where you live.
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Indiana Paycheck Calculator
Indiana Paycheck Quick Facts
- Indiana income tax rate: 3.23%
- Median household income: $60,813 (U.S. Census Bureau)
- Number of counties that have local income taxes: 92
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. Employers also match this amount for a total FICA contribution of 2.9% for Medicare and 12.4% for Social Security. Note that if you are self-employed, you need to pay that total yourself. However, there are some deductions to help self-employed workers recoup some of those taxes. Additionally, wages that exceed $200,000 are subject to a 0.9% Medicare surtax.
The IRS receives the federal income 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 that whenever you start a new job or want to make changes, you’ll need to fill out a new W-4. Withholding affects how much you will pay in taxes each pay period.
In recent years, the IRS has made multiple changes to the W-4. The updated form doesn’t let you to list total allowances anymore. Instead, it requires you to enter annual dollar amounts for things like non-wage income, income tax credits, total annual taxable wages and itemized and other deductions. The form also includes a five-step process that asks filers to enter personal information, claim dependents and indicate any additional income or jobs.
Your marital status and number of dependents are both factors that affect your withholding. Just be very careful about underpaying your taxes for the year. If you do this, you will be hit with a big bill come April. You could even face penalties if you underpay your taxes by $1,000 or more.
A financial advisor in Indiana can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
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 everyone must pay. Indiana counties’ local tax rates range from 0.50% to 2.90%. Check out the table below for Indiana county tax rates. The same rates apply to residents and nonresidents.
Indiana Local Tax Rates
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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.
How You Can Affect Your Indiana Paycheck
If you received a large tax refund or were hit with a massive tax bill when you last filed your income taxes, consider changing your withholdings on your W-4. You can fill out a new W-4 , or you can have a dollar amount withheld from every paycheck by entering that amount on the correct line on your W-4. This allows you to get closer to what you need to pay on your income taxes. (Not sure exactly how much you need to pay? Use this paycheck calculator to find out.)
While there is nothing wrong with getting a big refund, it’s nice to have access to that money throughout the year. That way you have the choice to invest that money or at least earn interest from a high-interest savings account. Consistently over-paying your taxes is like giving Uncle Sam a tax-free loan each year.
Pre-tax contributions are another factor that affect 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 put 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 before income and FICA taxes are applied. This lowers how much of your income is actually subject to taxation.
Indiana Top Income Tax Rate
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