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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- Our Tax Expert
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 Calculator
Indiana Paycheck Quick Facts
- Indiana income tax rate: 3.23%
- Median household income: $54,325 (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 December 2017, President Trump signed a new tax plan that slightly changed the income tax withholding rates. You should have seen changes to your paychecks starting in February 2018. Regardless, make sure to check your W-4 just to ensure that all the information there is still correct. This is especially important now, as the IRS made multiple changes to the W-4 for 2020.
The updated Form W-4 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. These alterations will affect anyone looking to adjust their withholdings or change jobs in 2020. Employees hired before 2020 don't need to fill out the new W-4, but employees hired as of Jan.1, 2020 must. The taxes you file in 2021 will encompass any changes you make in 2020.
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 0.35% to 3.38%. 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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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 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics