Indiana stands apart from most US states because every single one of its 92 counties levies a county-adjusted income tax (CAIT) on residents. Unlike states where local income taxes are confined to cities (like Ohio or Pennsylvania), Indiana's county tax system ensures that no Hoosier — rural or urban — escapes a local income tax layer. The rates are set by each county's income tax council and can change annually, making Indiana's local tax landscape one of the most granular in the country.
Combined with Indiana's flat 2.95% state income tax (down from 3.23% under a phased reduction), the total Indiana income tax burden ranges from 3.45% to 5.95% depending on your county of residence. This guide explains how the system works, which counties charge the most and least, and how Indiana's total burden compares to neighboring states like Ohio, Michigan, and Illinois.
Indiana's County Adjusted Income Tax (CAIT) is withheld by employers based on the employee's county of residence on January 1 — not the county where they work. This resident-based approach means that if you live in Marion County (Indianapolis) but work in Hamilton County, your employer withholds Marion County's tax rate on your wages, not Hamilton County's. Each January, the Indiana Department of Revenue publishes the official tax rates for all 92 counties for the upcoming year.
The county tax is applied to the same adjusted gross income as the state tax, after allowable deductions. Indiana's main deduction is a $1,000 personal exemption per taxpayer plus $1,500 per dependent. County taxes are filed as part of the standard Indiana state tax return (Form IT-40), so there is no separate county filing requirement. Employers use the Indiana WH-4 withholding form, which asks employees to specify their county of residence, to calculate the correct withholding.
Among Indiana's 92 counties, rates vary significantly. Here are the highest and lowest county rates for 2026:
| County | County Rate | State Rate | Combined |
|---|---|---|---|
| Randolph (highest) | 3.00% | 2.95% | 5.95% |
| Jasper | 2.86% | 2.95% | 5.81% |
| Ohio County | 2.00% | 2.95% | 4.95% |
| Marion (Indianapolis) | 2.02% | 2.95% | 4.97% |
| Hamilton (Carmel/Fishers) | 1.10% | 2.95% | 4.05% |
| Hendricks | 1.70% | 2.95% | 4.65% |
| Boone | 1.71% | 2.95% | 4.66% |
| Porter (lowest) | 0.50% | 2.95% | 3.45% |
Hamilton County, which includes the affluent suburbs of Carmel, Fishers, and Noblesville, has one of the lowest county rates despite being one of Indiana's wealthiest counties. This reflects the county's strong property tax base, which reduces reliance on income tax revenue.
The Indianapolis metro area (commonly called the 'Indy metro' or nine-county MSA) illustrates how dramatically county rates can vary within a single metro area. Marion County (Indianapolis proper) charges 2.02%, while surrounding suburban counties charge significantly less. This creates a modest tax incentive to live in the suburbs — though property values and cost of living differences often dwarf the income tax differential.
For a worker earning $75,000, the difference in county income tax between living in Marion County (2.02% of $74,000 taxable income = about $1,495/year) vs Hamilton County (1.10% = about $814/year) is approximately $681 per year. For $150,000 earners, the gap roughly doubles to approximately $1,371/year. This is meaningful but rarely the primary driver of residential location decisions in the Indianapolis metro.
Non-residents who earn income in Indiana are subject to Indiana state income tax on their Indiana-sourced income. Indiana county tax also reaches non-residents: if you live out of state but your principal place of work is in an Indiana county on January 1, you owe county tax at that county's rate. Indiana has reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin, meaning wages earned in Indiana by residents of those states are not subject to Indiana state income tax (and vice versa). The agreements do not cover Indiana county income tax, so employers must still withhold it.
If you work in Indiana but live in Illinois or another non-reciprocal state, you will owe Indiana state income tax on your Indiana wages, and you'll owe your home state tax as well — though you'll receive a credit for taxes paid to Indiana to avoid double taxation. The Indiana reciprocity agreements simplify filing for the large number of cross-border commuters in the Cincinnati, Louisville, and Chicago metro areas.
When adding federal income tax, Indiana's total income tax burden is moderate by national standards. At $100,000 income (single filer, standard deduction), an Indianapolis (Marion County) resident would pay approximately: Federal ~$13,170 + Indiana State ~$2,921 + Marion County ~$2,000 = ~$18,091 total (18.1% effective rate). Compare this to a Pulaski County resident at the same income: Federal ~$13,170 + State ~$2,921 + County ~$2,822 = ~$18,913.
Indiana does not levy a state sales tax on groceries and has a 7% statewide sales tax with no additional local sales tax, unlike neighboring Ohio or Illinois where local sales taxes add additional burden. Indiana's property taxes are also capped under Circuit Breaker legislation at 1% of assessed value for homestead property, making Indiana's overall tax environment relatively predictable for residents.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools. Learn more about our affiliate partnerships
★ 4.8 verified reviews · 3,758 reviews
Multi-jurisdiction tax situations — city tax on top of state on top of federal — can be complex to file correctly. Taxhub matches you with a CPA who specialises in your specific state and city. Fixed pricing, reviewed CPAs, no surprises.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get Matched with a Local CPA →Interested in reaching this audience? Advertise on CountryTaxCalc →