Overview of Indiana Taxes
Indiana has a flat statewide income tax. In 2017, that rate fell to 3.23% and will remain at that rate for the 2018 tax year. However, many counties charge an additional income tax. Statewide sales tax is 7% and the average effective property tax rate is 0.87%.
Number of Personal Exemptions
Your Income Taxes Breakdown
|Tax Type||Marginal |
|Total Income Taxes|
|Income After Taxes|
* These are the taxes owed for the 2018 - 2019 filing season.
Changes to Your Federal Income
Taxes Under the 2018 Tax Reform
- Your marginal federal income tax rate
- Your effective federal income tax rate
- Your federal income taxes
Total Estimated 2018 Tax Burden
Total Estimated Tax Burden $
Percent of income to taxes = %
- 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 state tax quick facts
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%.
Indiana County Income Taxes
|County||Resident and Non-resident Rate|
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
Places with the Lowest Tax Burden
Are you curious how your tax burden stacks up against others in your state? SmartAsset’s interactive map highlights the counties with the lowest tax burden. Scroll over any county in the state to learn about taxes in that specific area.
Where you live can have a big impact on both which types of taxes you have to pay each year and how much money you spend on them. SmartAsset calculated the amount of money a specific person would pay in income, sales, property and fuel taxes in each county in the country and ranked the lowest to highest tax burden.
To better compare income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a county by the household income less income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For property taxes, we compared the median property taxes paid in each county.
For fuel taxes, we first distributed statewide vehicle miles traveled down to the county level using the number of vehicles in each county. We then calculated the total number of licensed drivers within each county. The countywide miles were then distributed amongst the licensed drivers in the county, which gave us the miles driven per licensed driver. Using the nationwide average fuel economy, we calculated the average gallons of gas used per driver in each county and multiplied that by the fuel tax.
We then added the dollar amount for income, sales, property and fuel taxes to calculate a total tax burden. Finally, we created the Tax Burden Index in order to show how each county in the country compares to the county with the lowest tax burden (that is the county with a Tax Burden Index of 100).