Indiana Income Tax Calculator

How to Use This Indiana Income Tax Calculator

This Indiana income tax calculator estimates your annual state and federal tax liability for 2025 and 2026. Enter your gross income, filing status, and any pre-tax deductions, then select your Indiana county in the Locality dropdown. Selecting your county is critical — county CAGIT rates range from 0.5% to 2.02% and can significantly affect your total tax bill.

For a per-paycheck breakdown, use the Indiana paycheck calculator. To compare Indiana with other states, use the general income tax calculator.

How Indiana State Income Tax Works

Indiana uses a flat 2.95% state income tax rate on all Indiana taxable income. The calculation is straightforward:

1. Start with Indiana AGI — generally federal AGI, meaning wages minus pre-tax 401(k), health insurance, and HSA contributions.
2. Subtract the $1,000 personal exemption — per filer ($1,000 each for married filing jointly = $2,000 total). No standard deduction.
3. Multiply by 2.95% — the flat state rate produces Indiana income tax.
4. Subtract $40 per dependent — the dependent credit reduces tax owed directly.

Indiana's flat rate has been declining: 3.23% in 2022, 3.15% in 2024, 3.05% in 2025– 2026, with further reductions planned. This trend makes Indiana increasingly competitive among neighboring Midwest states.

Indiana County Income Tax — CAGIT

Indiana's County Adjusted Gross Income Tax (CAGIT)is a second layer of income tax levied by each of Indiana's 92 counties. Key features:

• Based on county of residence— unlike most local taxes, CAGIT follows where you live on January 1 of the tax year, not where you work. A suburban Indianapolis resident who commutes to Marion County to work owes their residential county's rate, not Marion County's 2.02%.
• Applied to Indiana AGI — pre-tax 401(k) and Section 125 deductions reduce the CAGIT base. The personal exemption does not reduce the CAGIT base (only the state tax base).
• Employer withholds at county rate — your employer withholds CAGIT based on the county listed on your Indiana WH-4 form. Update it when you move.

Combined state+county effective rates (2026)

• Marion County (Indianapolis): 3.05% state + 2.02% county = 5.07% combined
• Allen County (Fort Wayne): 3.05% + 1.48% = 4.53% combined
• Hamilton County: 3.05% + 1.10% = 4.15% combined
• Porter County: 3.05% + 0.50% = 3.55% combined

FICA Taxes — Social Security and Medicare

FICA is federal and applies to every Indiana income earner:

• Social Security: 6.2% on wages up to $176,100 (2025) or $184,500 (2026). No further withholding once you hit the wage base.
• Medicare: 1.45% on all wages with no cap.
• Additional Medicare: 0.9% on wages above $200,000 (single) or $250,000 (married jointly) — employee only, no employer match.

Step-by-Step Example — $85,000 Hamilton County Single Filer (2026)

1. Gross wages: $85,000
2. Federal standard deduction: −$16,100 → federal taxable income: $68,900. Federal income tax: ~$10,900.
3. FICA: 7.65% × $85,000 = $6,503.
4. Indiana state tax: ($85,000 − $1,000 exemption) × 2.95% = $2,562.
5. Hamilton County CAGIT: 1.1% × $85,000 (Indiana AGI) = $935.
6. Total taxes: $10,900 + $6,503 + $2,562 + $935 = $20,900
7. Annual net income: $85,000 − $20,900 = $64,100

How to Reduce Your Indiana Annual Tax Liability

• Maximize traditional 401(k) contributions— the 2026 limit is $23,500 ($31,000 if 50+). At Indiana's combined 5.07% Marion County rate + 22% federal, every $1,000 contributed saves about $270.70 in combined taxes.
• Contribute to an HSA — $4,300 (self-only) or $8,550 (family) in 2026. Reduces Indiana AGI and avoids FICA when contributed through payroll.
• Indiana CollegeChoice 529 contributions— contributions to Indiana's 529 plan earn a 20% Indiana tax credit (up to $1,500 credit for $7,500 in contributions). This is a direct credit against Indiana income tax, not a deduction — one of the best 529 incentives in the country.
• Claim the retirement income deduction if 62+ — Indiana allows a $2,000 deduction on private retirement income (401(k), IRA, pension distributions) for taxpayers age 62 or older, reducing both state tax and county CAGIT.
• Update your Indiana WH-4— Indiana's state withholding form. File an updated form whenever your marital status, number of exemptions, or county of residence changes. Correct withholding prevents unexpected bills or large refunds.

Retirement Income and Indiana Taxes

Indiana provides meaningful but targeted retirement income exemptions — it is not as retirement-friendly as Illinois (all retirement income exempt) but better than states that fully tax retirement income:

• Social Security benefits: Fully exempt from Indiana income tax. Indiana does not tax Social Security benefits regardless of income level. A retiree receiving $28,000 per year in Social Security owes $0 in Indiana state tax on that income — and also $0 in county CAGIT on it.
• Military retirement income: Fully exempt from Indiana income tax. Active duty military pay is also exempt. Indiana is among the more military-friendly states for retirement income.
• Private retirement income deduction (age 62–64): Taxpayers aged 62 to 64 may deduct up to $2,000 of private retirement income — including 401(k) distributions, IRA withdrawals, and pension payments — from Indiana taxable income. At 2.95% state + county CAGIT (varies), the $2,000 deduction saves approximately $50–$100 in Indiana taxes depending on county.
• Private retirement income deduction (age 65+): The deduction increases to $5,000 for taxpayers 65 and older. At combined state+county rates of 3.55%–5.07%, a $5,000 deduction saves $178–$254 in Indiana taxes per year.
• 401(k) and IRA distributions (under 62): Fully taxable in Indiana at the flat state rate plus county CAGIT. There is no special treatment for early distributions at the Indiana level — federal 10% early withdrawal penalty applies separately.
• Public pension income: Indiana state employee and teacher retirement system (INPRS) pension distributions are taxable in Indiana (unlike some states that exempt their own government pensions). However, they qualify for the $2,000 / $5,000 retirement income deduction if the recipient is the appropriate age.

Indiana retirees receiving Social Security plus modest private retirement income benefit most — the Social Security exemption alone can eliminate a large portion of state tax liability, and the $5,000 private retirement deduction (for those 65+) reduces the taxable amount of other distributions. A retiree with $25,000 Social Security (exempt) and $30,000 in IRA distributions pays Indiana tax only on $25,000 of the IRA distributions (after the $5,000 age 65+ deduction). Note that county CAGIT also applies to this taxable income.

Indiana Tax Credits and Deductions

Indiana offers several credits and deductions that can reduce the annual tax liability beyond the personal exemption:

• Indiana Earned Income Tax Credit (EITC): Indiana provides a state EITC equal to 9% of the federal EITC. For a qualifying family receiving a $3,500 federal EITC, Indiana adds $315 as a credit against Indiana state tax owed. The Indiana EITC is refundable — it can exceed Indiana tax liability and generate a refund. Note that the EITC applies only to the state income tax, not to county CAGIT.
• Indiana CollegeChoice 529 Tax Credit: Indiana offers one of the most generous 529 incentives in the country — a direct tax credit (not just a deduction) of 20% of contributionsto Indiana's CollegeChoice 529 plan, up to a maximum credit of $1,500 per year ($7,500 in contributions to max the credit). This is a direct reduction in Indiana income tax owed, not just a deduction from taxable income. At 2.95% + county, a $1,500 credit is worth significantly more than the equivalent deduction-based benefit in most states.
• Renter's Deduction: Indiana renters may deduct up to $3,000 of rent paid during the year from Indiana taxable income, reducing Indiana income tax by up to $92 (at the 2.95% state rate) plus a county CAGIT reduction.
• Homeowners Residential Property Tax Deduction: Indiana homeowners may deduct the lesser of property taxes paid or $2,500 per year from Indiana taxable income.
• County Return Filing: Indiana taxpayers who move between counties during the year, or whose county rate changed during the year, must often reconcile the correct county tax on their annual Form IT-40. Most Indiana taxpayers file a single IT-40 which covers both state and county taxes — a separate county return is not required in most cases, but the county of residence on January 1 must be accurately reported.

Indiana Form IT-40 (individual income tax return) is due April 15, with an automatic extension to November 15 (six months) available. An extension to file does not extend the time to pay — interest and penalties on unpaid balances begin accruing after April 15.

Tax Disclaimer

This calculator provides estimates for informational purposes only. It is not tax advice. Indiana flat rate, county CAGIT rates, and federal rules change annually. County rates are updated each year by the Indiana Department of Revenue. Consult a qualified Indiana-licensed CPA or tax professional for your specific situation.