Tax in Indiana: a complete guide
If you’re thinking about making Indiana your home, here’s everything you need to know about the tax system, from the flat rate of income tax to the taxable forms of retirement income.
Indiana income tax
Wherever you choose to live in the US, you’ll be subject to federal income tax according to the bracket you fall into. There are seven total as of 2023:
| Federal income tax rate | Income as a single person OR a married person/ registered domestic partner filing separately | Income as a married person/ registered domestic partner filing jointly OR a qualifying widower | Income as a head of household |
|---|---|---|---|
| 10 percent | $0 to $11,000 | $0 to $22,000 | $0 to $15,700 |
| 12 percent | $11,001 to $44,725 | $22,001 to $89,450 | $15,701 to $59,850 |
| 22 percent | $44,726 to $95,375 | $89,451 to $190,750 | $59,851 to $95,350 |
| 24 percent | $95,376 to $182,100 | $190,751 to $364,200 | $95,351 to $182,100 |
| 32 percent | $182,101 to $231,250 | $364,201 to $462,500 | $182,101 to $231,250 |
| 35 percent | $231,251 to $578,125 | $462,501 to $693,750 | $231,251 to $578,100 |
| 37 percent | $578,126 or more for single people, $346,876 or more for married people/domestic partners filing separately | $693,751 or more | $578,101 or more |
On top of this, you’ll usually need to pay state-level income tax. Indiana is in the group of states that charge a flat income tax rate.
According to the Tax Foundation, Indiana’s flat rate for individual income tax is 3.15 percent as of 2023. This applies to all Indiana-earning residents, regardless of their income. Some counties in Indiana may also levy additional personal income taxes at the local level, ranging from 0 to approximately three percent, depending on the area in question. Meanwhile, the flat rate for corporate income tax stands at 4.9 percent.
Indiana sales tax
The sales tax rate in Indiana, to be paid on most purchases made in the state, is 7 percent. Unlike in many other US states, local sales taxes aren’t levied, so you’re more likely to know in advance how much tax you’ll pay on a purchase than in a state like California. Sales tax exemptions include:
Groceries (excluding candy and soda)
Prescription drugs
Specific machinery, fuel and raw materials
Specific medical devices and services
Newspapers
Janitorial services
Transportation services
Specific software
In contrast, some goods are taxed at a higher rate. There’s a “sin tax” to be aware of for all of the following:
| Product | Cost |
|---|---|
| Alternative nicotine products | $0.40 per ounce |
| Any tobacco products other than cigarettes and snuff | 24% of the manufacturer’s price |
| Beer | $0.12 per gallon |
| Cigarettes | $1.00 per pack |
| Liquor | $2.68 per gallon |
| Snuff | $0.40 per ounce |
| Wine | $0.47 per gallon |
| Vapor products | 15% of gross retail income |
Indiana property tax
Indiana property tax is comparably low, standing at an average of 0.85 percent, according to Tax Rates.org. Accounting for the average property value statewide, we can determine that the average annual property tax amount residents pay is $1,051. This isn’t even accounting for certain deductions available to older people.
Like in any state, the actual cost of this tax depends on the priciness of the area you choose to reside in. Here are some yearly amount examples from a range of different Indiana counties:
| Indiana county | Median annual property tax payment |
|---|---|
| Adams | $1,110 |
| Bartholomew | $1,440 |
| Cass | $715 |
| Dearborn | $1,432 |
| Fulton | $617 |
| Hendricks | $2,099 |
| Jefferson | $1,038 |
| Parke | $503 |
| Porter | $2,119 |
Indiana motor tax
Alongside paying the standard seven percent sales tax on your initial purchase of a new or used motor vehicle in Indiana, you’ll need to cover any registration fees and pay an annual excise tax for your car, van, motorbike, etc. The amount you pay for this excise tax will differ depending on where you are in the state and the specifics of your vehicle, with some areas adding additional local taxes into the mix.
To keep your vehicle running and functioning, the expense doesn’t stop there. You will, of course, also need to pay for fuel and it’s associated tax. Currently, gasoline in Indiana is taxed at $0.34 per gallon, while diesel is taxed at $0.57 per gallon.
Indiana estate tax
There is no estate tax levied by the Indiana state government, though you will still be subject to federal estate tax guidelines regardless of where in the country you live. In many cases, these guidelines won’t apply, as the threshold for federal estate taxation is almost $13 million.
On the subject of “death taxes,” as they’re often called, there’s also no state-level inheritance tax in Indiana. However, you may still be subject to it if you receive money from a loved one in a different state with different inheritance taxation rules.
Indiana retirement tax
If enjoying your golden years in the stunning state of Indiana sounds appealing, you might wonder, “Is this a retiree-friendly place? Will I receive any special benefits or deductions?” The answer to both questions is yes, though perhaps not to the fullest extent that would be possible.
Social Security benefits are tax exempt, allowing you to avoid the flat income tax, but other forms of retirement income like 401(k)s and IRAs are not. Some deductions and discounts are available. For instance, over 65s can deduct $14,000 from their property value to reduce the due amount of property tax, but less than in states like Alaska and Florida. You can also check out the complete guide to retirement in Indiana here.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.