Indiana does not tax capital gains at a special rate. A gain from stocks, a business or real estate sits inside your federal adjusted gross income, and Indiana taxes that income at one flat rate. Two things make Indiana different from a one-rate state: the state rate is scheduled to step down for 2027, and a county income tax is added on top, set separately by each of the 92 counties.
This guide uses the Indiana Department of Revenue's rates page, its Departmental Notice #1 (county rates effective 1 October 2026), its individual income tax FAQs, overview and add-backs pages, its Tax Chapter, and two IRS pages, all read on 3 November 2026. The Department's full IT-40 and IT-40PNR instruction booklets were not available to us (the server refused automated requests, and we did not work around that), and we did not read the Indiana Code, so each rule below is stated only as far as the pages we read state it.
The Department's rates page says the Indiana individual adjusted gross income tax rate for 2026 is 2.95% and will adjust in 2027 to 2.90%. Its Departmental Notice #1 repeats the 2026 figure: for 2026 the state adjusted gross income tax rate for individuals is 2.95%. The 2027 step to 2.90% is already on the Department's page, so a gain realised in 2027 should face the lower state rate unless the law changes again, which we did not find any sign of in the pages we read.
Indiana counties add their own income tax. The rates page says county income tax rates may be adjusted in January and October. Departmental Notice #1, effective 1 October 2026, lists a rate for each county. In that table the lowest rate we found is Porter County at 0.5% and the highest is Randolph County at 3.0%; examples from the same table are Hamilton County at 1.1% and Marion County at 2.02%. See our Indiana county tax rates guide for the full list and check the Department's current notice before you sell, because rates can change in January and October.
Which county applies depends on where you live on 1 January, not where you are when you sell. The Department's FAQ says county tax is based on your county of residence (or employment for non-residents) on January 1 of the year you lived or worked in any Indiana county. The Department's notice does not spell out how county tax applies to a capital gain specifically, and we could not read the IT-40 booklet; in the notice's own withholding example the county rate is applied to the same taxable income as the state rate, so the table below assumes the same for a gain. Treat it as an estimate.
Next-year note: the Department's Tax Chapter for the 2025 filing year (last revised October 2025) says Indiana is restructuring local income tax: all existing LIT rates will expire, and cities and counties must adopt a new LIT rate under the new structure during the 2027 budget process, with the county-wide cap rising from 2.5% to 2.9% from 2028, and it adds that this may change before 2028. We did not find a published list of the new rates, so treat the October 2026 county rates as current for 2026 only and recheck before you sell in 2027 or later.
The Department's add-backs page tells filers to complete their federal return, Form 1040 or 1040-SR, through the federal adjusted gross income line before they begin the Indiana return. A gain reported on your federal return is therefore already in the starting figure. The Department adds that most expenses and deductions used to calculate your federal taxes are allowed on your Indiana return, but some must be added back; the add-backs we read concern items such as bonus depreciation and net operating losses, not capital gains. Its overview page lists proceeds from the sale of bonds and stocks among the investment income documents to have ready when you file.
We did not find a capital gains deduction or a lower rate for long holding periods in the Department pages we read. That is an absence in what we read, not a statement from the Department that none exists, so confirm with the IT-40 booklet or a preparer.
Federally, IRS Topic 409 says that if you have a net capital gain, a lower rate may apply than the rate on ordinary income, that you generally have a long-term gain if you hold an asset more than one year, and that net short-term capital gains are taxed as ordinary income at graduated rates. On the Indiana side, the Department publishes a single flat rate for individuals and we found no holding-period distinction in its pages. In practice, a long-term and a short-term gain of the same size looked identical for Indiana in everything we read.
This table is our arithmetic (gain times the published rate), not an official calculation. It shows the tax a gain adds if it is taxed at the state rate and at Marion County's 2.02% rate, ignoring exemptions, deductions, credits and any adjustments, rounded to the nearest dollar. Your own county rate will differ.
| Capital gain in federal AGI | State tax at 2.95% (2026) | State tax at 2.90% (2027) | Marion County tax at 2.02% | 2026 state + Marion |
|---|---|---|---|---|
| $10,000 | $295 | $290 | $202 | $497 |
| $50,000 | $1,475 | $1,450 | $1,010 | $2,485 |
| $100,000 | $2,950 | $2,900 | $2,020 | $4,970 |
| $500,000 | $14,750 | $14,500 | $10,100 | $24,850 |
Example (ours): a $50,000 gain taxed in 2026 for a Marion County resident adds about $1,475 of state tax and about $1,010 of county tax, roughly $2,485 together, an overall 4.97% on the gain. A resident of Hamilton County (1.1%) would pay the same state tax but a lower county amount.
The Indiana pages we read do not set out a general capital loss rule. The federal rule, in IRS Topic 409, is that if capital losses exceed capital gains you can claim the lesser of $3,000 ($1,500 if married filing separately) or your total net loss, and losses on personal-use property such as a home or car are not deductible. Because Indiana starts from federal adjusted gross income, a loss that reduces your federal figure would be expected to flow through, but the Department does not say so in the pages we read. Separately, the Department's FAQ says Indiana does not have a deduction for gambling losses, and its add-backs page mentions a narrow rule for certain preferred-stock losses, which must follow the federal limits on capital losses.
The Department says you are a full-year Indiana resident if you maintain your legal residence in Indiana from January 1 through December 31, and full-year residents file Form IT-40. Part-year residents who received income while living in Indiana, and full-year nonresidents who received income from Indiana sources, file Form IT-40PNR, and the overview page says such people must file a return. Full-year residents of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin who received salary, wages, tips or commission income from Indiana are subject to different rules and file Form IT-40RNR.
For county tax, a nonresident whose county of principal business or employment was in Indiana on 1 January must figure county tax on the income from that county. We did not read a rule that says whether an out-of-state resident's gain on stock or other intangible property is Indiana-source income, so we do not state one; ask the Department or a preparer, and read the IT-40PNR booklet.
We found no separate Indiana home sale rule. IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain on the sale of your main home from your income, or up to $500,000 if you file a joint return with your spouse. Because Indiana starts from federal adjusted gross income, we read the effect as leaving only the gain above that exclusion for Indiana to tax, but the Department pages we read do not say this in so many words. For the federal test, see our home sale capital gains guide.
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