Indiana has a dual tax structure similar to Maryland: 2.95% flat state tax PLUS mandatory county tax (0.5-3.38%, varies by county). All 92 Indiana counties levy income tax. You cannot avoid county tax - all IN residents pay it. At $100K income (after standard deduction): 2.95% state + 2.74% avg county = 5.69% combined, competitive regionally.
How Indiana's state+county tax works: State tax (2.95% flat) is the same for everyone. County tax (0.5-3.38%) varies by which county you live in on Dec 31. Pulaski County has the highest rate (3.38%) statewide. Marion County (Indianapolis) is a moderate 2.02% — not the outlier it's sometimes assumed to be. LaGrange County (Amish country) has the lowest (0.5%). At $100K (after $16,100 deduction, taxable=$83,900): Marion resident pays $2,475 state + $1,695 county = $4,170 total (4.97% combined). Pulaski resident pays $2,475 state + $2,836 county = $5,311 total (6.33% combined). LaGrange resident pays $2,475 state + $420 county = $2,895 total (3.45% combined).
Indiana's tax competitiveness: Indiana cut its state rate from 3.23% (2015) → 3.05% → 2.95% (2023), positioning as business-friendly. But county taxes add 0.5-3.38%, making total burden 3.45-6.33% depending on county. Still competitive vs neighbors: IL 4.95% flat (no county tax), OH 2.75-3.5% state + local varies, MI 4.25% flat, KY 4% flat.
Source: Indiana Department of Revenue - Individual Income Tax
Here's what Indiana residents actually pay at different income levels (2026, single filer, standard deduction):
| Annual Income | Federal Tax | State Tax | Total Tax | Take-Home Pay | Effective Rate |
|---|---|---|---|---|---|
| $50,000 | $3,820 | $1,000 | $4,820 | $45,180 | 9.6% |
| $75,000 | $7,670 | $1,738 | $9,408 | $65,592 | 12.5% |
| $100,000 | $13,170 | $2,475 | $15,645 | $84,355 | 15.6% |
| $150,000 | $24,734 | $3,950 | $28,684 | $121,316 | 19.1% |
| $250,000 | $51,304 | $6,900 | $58,204 | $191,796 | 23.3% |
Note: Includes federal and state income tax only. Does not include FICA (Social Security/Medicare), which adds 7.65% for employees.
Key takeaway: At $100K, Indiana takes $2,475 in state tax alone.
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Migration Trends: Indiana experienced modest net outmigration of -8,450 residents (2021-2022). Top origin: Illinois (18,340 from IL - escaping Chicago high taxes, Indianapolis jobs), Ohio (12,560 from OH - manufacturing jobs), Michigan (8,670 from MI - lower cost). Outflow: Florida (14,230 to FL - 0% tax), Texas (11,890 to TX - 0% tax), Tennessee (9,120 to TN - 0% tax). Why move to Indiana: Manufacturing jobs (steel, auto, pharma - Eli Lilly $70B market cap), low cost ($210K median home Indianapolis), moderate taxes (5.79% avg vs IL 4.95% but IN has lower cost), central US location. Why leave: Small job market (Indianapolis 2.1M vs Chicago 9.5M), declining manufacturing base, neighbors have 0% (TN/TX) or similar rates (IL 4.95%, OH 2.75%).
| State | Tax Rate | Tax on $100K Income | Difference from Indiana |
|---|---|---|---|
| Indiana | 2.95% flat | $2,475 | Baseline (state only, +county) |
| Illinois | 4.95% flat | $4,153 | +$1,678 (higher) |
| Ohio | 2.75% + local (2026, HB96) | $3,991 | +$1,516 (higher) |
| Michigan | 4.25% flat | $4,250 | +$1,775 (higher) |
| Kentucky | 3.5% flat | $2,937 | +$462 (higher) |
Key insight: Indiana's 2.95% flat state tax ($2,475 at $100K) is among the lowest in the region — lower than Illinois ($4,153), Ohio ($3,991), Michigan ($4,250), and Kentucky ($2,937). However, Indiana also charges mandatory county tax (0.5-3.38%) which brings the real combined burden to $2,895-$5,311 depending on county. With average county tax (~2.74%), total combined is ~$4,774 — above Illinois. IL also has higher property tax (1.88% vs IN 0.76%) and higher cost of living. On state+property total at $100K + $210K home: IN $2,475 state + $1,596 property = $4,071 vs IL $4,153 + $3,948 = $8,101 — Indiana wins significantly on property-weighted total.
Bottom line: Indiana's 2.95% state tax is among the lowest flat rates nationally. County taxes (0.5-3.38%) add more, making the real combined rate 3.45-6.33%. Living in low-county-tax counties (LaGrange 0.5%, Whitley 1.35%) makes IN very competitive. Living in Marion County/Indianapolis (2.02% county) is actually one of the more moderate rates near the state's population centers, not a punishing outlier. Best strategy: since Marion's rate already sits close to nearby counties (Hamilton 2.08%, slightly higher; Hendricks 1.85%, slightly lower), the county-choice decision matters far less than commonly assumed — differences vs Marion are typically under $200/year, not $1,000+.
All 92 Indiana counties levy mandatory income tax (0.5-3.38%) in addition to 3.05% state tax. County rate is based on where you live on Dec 31. Highest: Pulaski County 3.38%, Lake County (Gary) 2.88%, St. Joseph County (South Bend) 2.44%. Marion County (Indianapolis) is a moderate 2.02% — not among the state's highest. Lowest: LaGrange County (Amish country) 0.5%, Whitley County 1.35%, Allen County (Fort Wayne) 1.73%. At $100K (taxable $83,900): Living in Marion costs $4,170 combined (2.95% + 2.02%) vs LaGrange $2,895 (2.95% + 0.5%) = $1,275/year difference just from county. Hamilton County (Carmel/Fishers, 2.08%) is actually slightly higher than Marion — moving there wouldn't save money. Hendricks County (1.85%) offers a small savings of about $143/year vs Marion.
Depends on county. Illinois has 4.95% flat with NO county tax. Indiana has 2.95% state + 0.5-3.38% county. At $100K (taxable $83,900): IL $4,153 state vs IN $2,475 state - IN saves $1,678 on state tax. But IN avg county tax ($2,299) adds back. Net: IN $4,774 total vs IL $4,153 - Illinois saves $621/year on income tax alone. HOWEVER: Property tax matters. IL 1.88% avg vs IN 0.76%. On $210K home: IL pays $3,948 property, IN pays $1,596 - IN saves $2,352/year on property. Total income+property: IN $6,370 vs IL $8,101 - Indiana saves $1,731/year overall. Best for: IN if homeowner, IL if renter.
Indiana cut state tax aggressively (from 3.23% in 2015 to 2.95% in 2023) to advertise as business-friendly. But Indiana shifts tax burden to counties - all 92 counties levy 0.5-3.38% income tax, making combined total 3.45-6.33% (on taxable income after standard deduction). This is political strategy: State can claim low 2.95% rate in headlines while actual burden is 4-6%. Compare to IL: 4.95% flat, no county tax, simpler. OH: flat 2.75% state (2026, House Bill 96), some cities add local (Cleveland 2.5%, Columbus 2.5%), but many OH suburbs have 0% local. IN's county tax is unavoidable statewide.
Indiana fully exempts Social Security (0% tax). Pension/401k/IRA: Fully taxable at 3.05% state + county rate. Age 65+ can deduct $4,000 from non-SS retirement income. At typical retiree income ($40K SS + $40K pension = $80K): $40K SS exempt, pension taxed on $36K (after $4K deduction) = $1,825 IN tax (2.3% effective using Marion County 2.02% + 3.05%). This is moderate: worse than TN/TX/FL (0%), better than IL $3,960 (4.95%, SS exempt), similar to OH $384 (SS exempt, pension taxed only above the $26,050 threshold, 2026 flat 2.75% rate). Indiana also has no estate or inheritance tax. Overall: IN is moderate for retirees - not great (0% states better), not terrible (lower than IL/MI).
Indiana's total burden is moderate. At $100K with $210K Indianapolis home: $4,774 income (state+county) + $1,596 property (0.76%) + $3,500 sales (7% on $50K) = $9,870 total (9.9%). Compare: Illinois $100K + $210K home: $4,153 income + $3,948 property (1.88%) + $4,125 sales (8.25%) = $12,226 total (12.2%) - IN saves $2,356/year! Ohio $100K + $210K home: $3,991 income + $2,856 property (1.36%) + $2,975 sales (5.95% Columbus) = $9,822 total (9.8%) - Ohio's true property tax rate is much higher than previously stated here, essentially eliminating its former edge: OH now saves only about $48/year vs IN, a near-wash rather than a meaningful advantage. Result: Indiana beats Illinois clearly (lower property tax + now lower income tax total). Loses to Ohio still. IN is best if: You need Indianapolis job market and can't relocate to Columbus.
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How we calculate: Indiana uses 2.95% flat state tax PLUS county tax (0.5-3.38%). We apply the federal standard deduction ($16,100 single) to compute taxable income, then calculate: state tax (taxable × 0.0295) + county tax (taxable × avg 0.0274 or specific county rate) + federal tax. Examples use statewide average county rate (2.74%). Data sources: Indiana Department of Revenue (2026 state rate 2.95%, county rates by county), U.S. Census Bureau (migration). Verification: IN's 2.95% flat rate confirmed via live calculator (State Tax = $2,475 at $100K income). County rates (0.5-3.38%) verified against official county tax tables (Pulaski 3.38% highest, Marion 2.02%, LaGrange 0.5% lowest). Limitations: Examples use statewide avg county (2.74%). Actual tax depends on your specific county. Does not include: property tax (0.76% avg), sales tax (7%), renter's deduction, age 65+ $4K retirement deduction.
Last Updated: May 2026
Verified By: Daniel · CountryTaxCalc
Contact: For corrections or questions, visit our contact page.
Last Updated: May 2026