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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Pennsylvania VS COUNTRY B Indiana

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

Daniel · CountryTaxCalc Updated August 2026 Tax Comparison 2026
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OVERVIEW
On paper, Indiana's 2.95% flat state rate edges out Pennsylvania's 3.07%, saving $101/year at $100,000 income ($2,475 vs $2,576) and growing to $581/year at $500,000. But this comparison comes with a critical caveat: Indiana's figures are state-tax-only, while every one of Indiana's 92 counties levies an additional mandatory county income tax ranging from 0.5% (LaGrange County) to 3.38% (Marion County/Indianapolis). Once county tax is added, Indiana's income-tax advantage evaporates almost everywhere — even the lowest county rate (0.5%) pushes Indiana's combined rate to roughly 3.45%, above Pennsylvania's flat 3.07%, and Marion County's 3.38% surtax pushes the combined rate to 6.33%, more than double Pennsylvania's. Property tax tells a different story: Indiana's average effective rate (~0.84%) is far lower than Pennsylvania's (~1.49%), worth about $2,600/year on a $400,000 home. On combined income-plus-property tax, Indiana still wins overall in most low-to-moderate county-tax areas, but Marion County residents can end up paying more in total than Pennsylvania residents once both income and county tax are counted. On retirement income, Pennsylvania is considerably more generous, fully exempting Social Security, pensions, and 401(k)/IRA withdrawals, while Indiana only exempts Social Security and offers a modest $3,000-per-person pension exclusion, taxing the rest at the state's flat rate plus county tax.
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
Pennsylvania
TAX RATE
3.07%
Flat Tax
Flat 3.07% state rate on all income; Philadelphia residents add 3.79% city wage tax
🏎️
COUNTRY B
Indiana
TAX RATE
2.95%
Flat Tax + County Tax
Flat 2.95% state rate, plus a mandatory county income tax (0.5%-3.38%) in all 92 counties
TYPICAL ANNUAL DIFFERENCE
Moving from Indiana → Pennsylvania at $100,000
$101
That's $8/month back in your pocket
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
🔔 PA TAX
🏎️ IN TAX
SAVINGS
10-YEAR
$50,000
$1,041
$1,000
$41
$410
$75,000
$1,808
$1,738
$70
$700
$100,000
$2,576
$2,475
$101
$1,010
$150,000
$4,111
$3,950
$161
$1,610
$250,000
$7,181
$6,900
$281
$2,810
$500,000
$14,856
$14,275
$581
$5,810
💡

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🔔

Pennsylvania Pros & Cons

+ PROS
  • No county or local income tax outside Philadelphia — a flat 3.07% is the final answer for the vast majority of Pennsylvania residents
  • Full retirement-income exemption: Social Security, pensions, and 401(k)/IRA withdrawals are all tax-free at the state level, at any age
  • Predictable statewide rate makes it easier to compare take-home pay than Indiana, where the true rate depends on which of 92 counties you live in
  • Once Indiana's county tax is added, Pennsylvania's headline rate disadvantage (3.07% vs 2.95%) disappears in nearly every Indiana county
− CONS
  • Higher average property tax (~1.49%) than Indiana (~0.84%) — worth about $2,600/year more on a $400,000 home
  • Philadelphia residents pay an additional 3.79% city wage tax, pushing their combined rate to 6.86%
  • Pennsylvania levies an inheritance tax on transfers to non-spouse heirs (4.5%-15%) — Indiana has none
  • The state-only comparison headline (PA loses by $101/year at $100K) looks worse for Pennsylvania than the real-world picture once Indiana county tax is included
🏎️

Indiana Pros & Cons

+ PROS
  • State-only flat rate (2.95%) is technically lower than Pennsylvania's 3.07%, saving $41 to $581/year at the state level alone
  • Much lower average property tax (~0.84%) than Pennsylvania (~1.49%) — saves roughly $2,600/year on a $400,000 home
  • No inheritance or estate tax, unlike Pennsylvania's 4.5%-15% inheritance tax on non-spouse heirs
  • Indianapolis offers a growing logistics, motorsports, and life-sciences job market at a notably lower cost of living than most Northeast metros
− CONS
  • Every one of Indiana's 92 counties levies an additional mandatory income tax (0.5%-3.38%) that isn't reflected in the state-only figures above — even the lowest county rate pushes the true combined rate above Pennsylvania's 3.07%
  • Marion County (Indianapolis), at 3.38%, brings the combined state+county rate to 6.33% — more than double Pennsylvania's flat rate
  • Only a modest $3,000-per-person pension exclusion, versus Pennsylvania's full exemption of all pensions and 401(k)/IRA withdrawals
  • The advertised income-tax savings over Pennsylvania are essentially a mirage for anyone living in a mid-to-high county-tax area
FAQ

Frequently Asked Questions

Is Pennsylvania or Indiana cheaper for state income tax?

At the state-tax-only level, Indiana is very slightly cheaper: its 2.95% flat rate costs $2,475 at $100,000 income versus Pennsylvania's 3.07% at $2,576, a $101/year difference. But this comparison excludes Indiana's mandatory county income tax, which applies on top of the state rate in all 92 counties and typically erases or reverses this advantage — see the next question.

Does Indiana's county tax change the answer?

Yes, dramatically. Every Indiana county adds its own income tax (0.5% to 3.38%) on top of the 2.95% state rate. At $100,000 income (roughly $83,900 taxable after the federal standard deduction), even LaGrange County's minimum 0.5% rate adds about $420, bringing Indiana's total to about $2,895 — already higher than Pennsylvania's $2,576. Marion County (Indianapolis), at 3.38%, adds about $2,836, bringing the total to roughly $5,311 — more than double Pennsylvania's bill.

Which state has lower property tax, Pennsylvania or Indiana?

Indiana has the clearly lower average effective property tax rate at roughly 0.84%, compared to Pennsylvania's roughly 1.49%. On a $400,000 home, that's about $3,360/year in Indiana versus $5,960/year in Pennsylvania — a savings of about $2,600/year in Indiana's favor.

So which state actually wins on combined income plus property tax?

It depends heavily on which Indiana county you're comparing. Using state-only figures, at $100,000 income with a $400,000 home, Indiana's combined bill (about $5,835) is far lower than Pennsylvania's (about $8,536). But add Marion County's 3.38% local tax and Indiana's total rises to about $8,671 — slightly higher than Pennsylvania. Lower-tax counties like LaGrange keep Indiana well ahead even after adding property tax.

Does either state tax retirement income like 401(k) and IRA withdrawals?

Pennsylvania fully exempts Social Security, pensions, and 401(k)/IRA withdrawals from state tax at any age. Indiana exempts Social Security but only offers a $3,000-per-person deduction on private pension and retirement income, taxing the remainder at the state's flat rate plus whatever county tax applies. For retirees drawing heavily on a 401(k) or pension, Pennsylvania is meaningfully more favorable.

How much would I actually save moving from Pennsylvania to Indiana?

It depends entirely on the county. Moving to a low-tax county like LaGrange (0.5% county rate) could still save a meaningful amount once property tax is factored in. Moving to Marion County (Indianapolis, 3.38%) could actually cost more overall than staying in Pennsylvania, once both the higher combined income tax and property tax gap are weighed against Pennsylvania's numbers — always check the specific county rate before assuming Indiana is cheaper.

What is Marion County's combined income tax rate?

Marion County (home to Indianapolis) levies a 3.38% local income tax on top of Indiana's 2.95% state rate, for a combined 6.33% — well above Pennsylvania's flat 3.07%, and even above Philadelphia's combined 6.86% rate at some income levels once Pennsylvania's inheritance-tax-free status and full retirement exemption are factored in separately.

Is Indianapolis or Philadelphia/Pittsburgh better for job opportunities?

Indianapolis has a growing logistics, motorsports, and life-sciences (Eli Lilly) job market with a notably lower cost of living. Philadelphia offers deeper finance, healthcare, and pharma employment, while Pittsburgh has become a hub for robotics and autonomous vehicles anchored by Carnegie Mellon. Pennsylvania's two metros generally offer higher salary ceilings, which can offset its property tax and Philadelphia wage tax disadvantages.
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