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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Illinois VS COUNTRY B Indiana

Side-by-side analysis of income tax, effective rates, and take-home pay for Illinois and Indiana in 2026.

Daniel · CountryTaxCalc Updated October 2026 Income tax verified October 2026 Tax Comparison 2026
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OVERVIEW
Both states have flat income taxes, but the comparison isn't straightforward. Illinois: 4.95% flat, NO local income tax. Indiana: 2.95% state + 0.5-3.38% county tax = 3.45-6.33% total. CRITICAL: 91 of Indiana's 92 counties levy income tax. Marion County (Indianapolis): 2.02% = 4.97% total. Lake County (near Chicago): 1.5% = 4.45% total. At $100,000: Illinois ~$4,805 vs Indiana (Marion) ~$4,941 (state tax net of exemption plus county tax at the county rate)—Illinois is cheaper in Indianapolis by about $136. At $100K, Indiana comes out cheaper wherever the county rate is below roughly 1.9%, and Illinois is cheaper above that. Low-tax counties like Hamilton (0.84% county; about $3,761 total at $100K) offer clear savings. Property taxes: Illinois 1.88% (tied for highest in the US, with New Jersey) vs Indiana 0.76%—Indiana wins big here. Choose Illinois if: you're in a very-high-county-tax Indiana area, want simpler filing, or value Chicago job market. Choose Indiana if: you're in a low-to-mid county-tax area, own expensive property, or are retired.
Section 01

The Big Picture

Top-line rates and effective take-home for a typical earner — including income tax, social contributions, and applicable surcharges.

🏙️
COUNTRY A
Illinois
TAX RATE
4.95%
Flat Tax

No local income tax

🏎️
COUNTRY B
Indiana
TAX RATE
2.95%
Flat Tax

Plus 0.5-3.38% county tax

TYPICAL ANNUAL DIFFERENCE
Moving from Illinois → Indiana at $100,000 (county dependent; + = Indiana saves)
$1,496 to +$1,384

That's Varies by county more than staying in Illinois

Section 02

Tax Savings by Income Level

Net take-home after all income tax, social contributions, and surcharges — for a single employee with no dependents.

GROSS INCOME
🏙️ IL TAX
🏎️ IN TAX
SAVINGS
10-YEAR
$50,000 (Marion County)
~$2,330 (4.66% eff.)
~$2,456 (state $1,446 + Marion County ~$1,010)
Illinois saves $126
$1,260
$75,000 (Hamilton County)
~$3,568 (4.76% eff.)
~$2,813 (state $2,183 + Hamilton County ~$630)
Indiana saves $755
$7,550
$100,000 (Lake County)
~$4,805 (4.81% eff.)
~$4,421 (state $2,921 + Lake County ~$1,500)
Indiana saves $384
$3,840
$100,000 + $400K home
~$4,805 + $7,520 property
~$4,941 (Marion) + $3,040 property
Indiana saves ~$4,344 total
$43,440
$150,000 (Marion County)
~$7,280 (4.85% eff.)
~$7,426 (state $4,396 + Marion County ~$3,030)
Illinois saves $146
$1,460
💡

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🏙️

Illinois Pros & Cons

+ PROS
  • No local income tax: Your rate is 4.95%, period—no county-level complexity or varying rates
  • Chicago job market: Higher salaries for tech, finance, law—often 20-30% above Indianapolis
  • O'Hare hub: International connectivity for business travel unmatched in Midwest
  • Progressive politics: May align better with certain lifestyle preferences
− CONS
  • Highest property taxes in Midwest: 1.88% average (tied for highest in the US nationally, with New Jersey) vs Indiana's 0.76%—$400K home = $7,520/year
  • Chicago crime concentrated: While suburbs safe, city perception affects property values
  • Pension crisis: Illinois has $140B+ unfunded pension liability—future tax hikes likely
  • Flat tax ceiling: 4.95% hits from first dollar—no low-income benefit
🏎️

Indiana Pros & Cons

+ PROS
  • Lower property taxes: 0.76% average saves thousands on expensive homes annually
  • Lower state rate: 2.95% base is 2.0 points below Illinois (matters in low-tax counties)
  • Indianapolis growth: Booming tech scene, lower cost of living than Chicago
  • Tax caps: Property tax limited to 1% of assessed value for homesteads
− CONS
  • Hidden county taxes: 91 of 92 counties add 0.5-3.38%—Marion County brings total to 4.97%
  • Filing complexity: Must navigate county-specific rules, rates change frequently
  • Lower salaries: Indianapolis median income 15-20% below Chicago for equivalent roles
  • Infrastructure spending: Lower taxes = less funding for transit, roads in some areas
FAQ

Frequently Asked Questions

Is Indiana really cheaper than Illinois for taxes?

It depends on county. Indiana's 2.95% state rate is lower, but 91 of 92 counties levy additional income tax (0.5-3.38%). Marion County (Indianapolis) adds 2.02% = 4.97% total, above Illinois's 4.95%, and about $136 more than Illinois at $100K (~$4,941 vs $4,805). Indiana wins clearly in most counties — like Hamilton (0.84% = 3.79% total) or Hendricks (1.25% = 4.20% total). Always add your specific county rate.

What's the best Indiana county for low taxes near Chicago?

Lake County (Gary, Crown Point, Schererville) is closest to Chicago with a 1.5% county rate = 4.45% total, versus Illinois's 4.95% nominal rate. Porter County is 1.72% = 4.67% total. LaPorte County is 1.44% = 4.39% total. Savings at border counties are meaningful — about $384/year at $100K income in Lake County (state tax net of exemption plus ~1.5% county, estimated).

How do property taxes compare between Illinois and Indiana?

Indiana wins decisively. Illinois: 1.88% average (tied for the highest in the US nationally, with New Jersey — and the highest in the Midwest by a wide margin). Indiana: 0.76% average with 1% homestead cap. On a $400,000 home: Illinois ~$7,520/year, Indiana ~$3,040/year = $4,480 annual savings. This often outweighs income tax differences.

Should I move from Chicago suburbs to Indiana?

Depends on your situation. If your Indiana county rate keeps total under 4.95%, and you own an expensive home (property tax savings), Indiana wins. But Chicago salaries are 15-30% higher for many fields. A $20,000 salary cut to save $2,000 in taxes is a bad trade. Retirement relocations make more sense than working-age moves.

Do both states tax retirement income?

Partial taxation in both. Illinois exempts Social Security and most retirement income (pensions, 401k, IRA) from state tax—major retiree benefit. Indiana taxes retirement income but excludes $3,000/person from pensions/401k (modest exemption). For retirees, Illinois is actually more favorable despite higher rates.
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