Indiana's state income tax is a flat 2.95%, which is the fifth-lowest state figure in the country. On $85,000 it takes $2,478.
Then your county takes its own, and at a common 2% that is roughly $1,680 — raising the combined bill by about two thirds.
Indiana's county income tax has two features that make it unusual even among states with a local layer. Your county is locked on January 1 and does not change if you move mid-year. And several counties publish rates to six decimal places, which is not a formatting quirk — rounding them introduces error that compounds across a full year of withholding.
A note before you start. This is general education, not tax advice. Federal figures are tax year 2026, from IRS Revenue Procedure 2025-32 and the Social Security Administration; Indiana's rate and county-tax rules come from this site's own sourced 50-state dataset, which cites the Department of Revenue's Departmental Notice #1. Every dollar figure computed by the site's engine is on a single filer with one exemption, no dependents and no pre-tax deferrals unless stated. County income taxes are named here but never included in any total — see section 3.
1. The flat rate and the small exemption
Indiana's income tax is 2.95% on adjusted gross income after exemptions. There is no standard deduction.
Indiana's shelter is a personal exemption of $1,000 — among the smallest in the country. Pennsylvania shelters nothing at all; Indiana shelters $1,000; Michigan shelters $5,900; the federal standard deduction is $16,100.
| Federal | Indiana | |
|---|---|---|
| Salary | $85,000 | $85,000 |
| Standard deduction | −$16,100 | — |
| Personal exemption | — | −$1,000 |
| Taxable income | $68,900 | $84,000 |
Indiana taxes a base $15,100 larger than the federal one. A low rate applied to nearly the whole salary is the structure, and it is why 2.95% produces $2,478 rather than the $2,033 that 2.95% of federal taxable income would be.
Additional exemptions exist for dependents and for certain circumstances, and at 2.95% each $1,000 exemption is worth about $30 a year — small enough that missing one is not costly, and worth claiming anyway.
2. What it costs across incomes
| Salary | Indiana state tax | Marginal rate | Take-home (before county) |
|---|---|---|---|
| $30,000 | $856 | 2.95% | $25,430 |
| $45,000 | $1,298 | 2.95% | $37,040 |
| $60,000 | $1,741 | 2.95% | $48,650 |
| $85,000 | $2,478 | 2.95% | $66,150 |
| $120,000 | $3,511 | 2.95% | $89,740 |
| $175,000 | $5,133 | 2.95% | $125,746 |
Flat means flat: 2.95% at every row. No bracket confusion, no marginal-versus-effective gap worth discussing, and a raise taxed at exactly the rate your first dollar was.
A joint filer on $85,000 pays $2,449 — only $29 less, because the doubled $1,000 exemption is the only thing that widens.
Run your own salary against Indiana's flat rate3. Every county, and the January 1 rule
Every Indiana county levies a county income tax, set by county income tax councils. There is no Indiana county where the state figure is the complete answer.
Your county is fixed on January 1
This is the rule that surprises people, and it is genuinely unusual.
Your county for income tax purposes is determined on January 1 of the year in which the taxable year begins. Residence governs. And only if you lived out of state on January 1 does your county of principal work location apply instead.
Two consequences follow, and both are the opposite of what most people assume:
A mid-year move does not change your rate for that year. Move from a 1.5% county to a 2.5% county in June and you pay the January 1 county's rate for the entire year — including on income earned after the move. Move the other way and you keep the lower rate for the whole year.
Where you work usually does not matter. Unlike Ohio, where work location creates its own liability, Indiana's rule is residence-first. Your work county only enters the picture if you were living outside Indiana on January 1.
The practical planning point: if you are moving between Indiana counties and the rates differ meaningfully, the timing of the move relative to January 1 decides which rate you pay for a full year.
The rates change frequently
County income tax councils set their own rates and revise them regularly. The Department of Revenue reissues Departmental Notice #1 during the year and asterisks each county whose rate has moved.
Between one recent issue and the next, Carroll, Grant, Greene, Howard, Shelby and Union all changed. That is six counties in a single revision cycle, which tells you how much movement there is.
If you last checked your county rate a year or two ago, there is a meaningful chance it has moved since.
4. Do not round the county rates
Several Indiana counties carry rates to six decimal places in the Department's own table:
| County | Rate |
|---|---|
| Brown | 0.025234 |
| Carroll | 0.024733 |
| Jasper | 0.028640 |
| Whitley | 0.016829 |
This is not a presentational flourish. Rounding 0.025234 to 2.52% or 2.5% introduces error that compounds across a full year of withholding, and on a substantial salary the difference is real money by December.
The general point for anyone building a spreadsheet or checking their own withholding: use the rate as published, at full precision. A county rate is not a round number in Indiana and treating it as one produces a figure that will not reconcile.
5. What the county actually costs
At a 2% county rate on $84,000 of Indiana taxable income, an $85,000 earner pays roughly $1,680.
| Amount on $85,000 | |
|---|---|
| Indiana state income tax | $2,478 |
| County tax at 2% | ≈$1,680 |
| Combined state and local | ≈$4,158 |
The county adds about two thirds again on top of the state figure, taking a combined effective rate to roughly 4.9% of gross rather than the 2.9% the state number implies.
At Brown County's 2.5234%, the same earner pays about $2,120 — nearly as much as the state took.
6. The full picture on $85,000
| Amount | |
|---|---|
| Gross salary | $85,000 |
| Federal income tax | −$9,870 |
| Social Security (6.2%) | −$5,270 |
| Medicare (1.45%) | −$1,233 |
| Indiana state income tax | −$2,478 |
| Take-home before county tax | $66,150 |
| County tax at 2%, not included | ≈−$1,680 |
| Take-home after | ≈$64,470 |
Federal takes $16,373 — more than six times Indiana's state figure, and nearly four times the combined state-and-county number.
7. Where Indiana ranks
On the state figure alone, Indiana's $2,478 is fifth-lowest of the 41 income-tax states:
| State | Tax on $85,000 |
|---|---|
| North Dakota | $377 |
| Ohio | $1,621 |
| Arizona | $1,731 |
| Louisiana | $2,164 |
| Indiana | $2,478 |
| Pennsylvania | $2,610 |
| Kentucky | $2,857 |
| Michigan | $3,362 |
| Illinois | $4,063 |
Every state above Indiana on that list except Arizona, Louisiana and North Dakota also has a local income tax layer, so the ranking compares different fractions of different answers.
The comparison worth making regionally: an Indiana resident in a 2% county pays roughly $4,158 combined. An Illinois resident pays $4,063 with no local layer at all. On the state figure Indiana looks $1,585 cheaper than Illinois; on the combined figure they are within $100 of each other.
That reversal is the single most useful thing to know about Indiana's tax position, and no state-level comparison will show it to you.
8. Reducing what Indiana takes
Pre-tax deferrals reduce both the state and county tax. Indiana starts from federal adjusted gross income, so a traditional 401(k) contribution lowers Indiana AGI — and because the county tax is computed on the same figure, the deferral saves at the combined rate.
A $10,000 deferral at 2.95% state plus a 2% county saves roughly $495 in Indiana tax, on top of the federal saving. Modest in absolute terms because both rates are low, and it does capture both layers.
HSA contributions add the FICA saving — 7.65% that a 401(k) deferral does not touch — through payroll under a cafeteria plan.
Claim your exemptions, though at $30 each they are not where the money is.
Check your county rate against the current Departmental Notice #1, at full precision. Given how frequently rates move, this is worth doing annually rather than once.
9. Retirement in Indiana
Indiana does not tax Social Security benefits.
It does tax distributions from 401(k), 403(b) and traditional IRA accounts as ordinary income at the flat 2.95%, and the county tax applies to them as well. There are deductions available for certain military and railroad retirement income, and a deduction for some older taxpayers subject to income limits.
The shape: Indiana exempts Social Security and taxes everything else at a low flat rate, plus the county. For a retiree drawing substantially on retirement accounts, the combined state-and-county figure of roughly 4.9% is the relevant number, not the 2.95% headline.
Because the county tax follows the January 1 residence rule, a retiree moving between counties faces the same timing consideration a worker does.
10. Moving to or from Indiana
The state rate flatters Indiana; the combined rate is ordinary. 2.95% is genuinely among the lowest state rates in the country. Add a typical county and Indiana lands close to Illinois, which has no local layer at all.
Time a county move around January 1 if the rates differ. This is a genuine and unusual planning point — the date decides your rate for a full year in either direction.
Reciprocity exists with several neighbouring states covering state income tax for commuters, and as everywhere it does not touch county taxes.
Property tax is capped by the Indiana constitution at percentages of assessed value that vary by property type, which is a meaningful structural feature for homeowners and a separate question from income tax.
11. Why the January 1 rule exists, and how to use it
A residence test fixed on a single date looks arbitrary until you consider the alternative.
The administrative reason. A county tax that apportioned by days of residence would require every employer to track when each employee moved, split withholding between counties mid-year, and reconcile it at filing. Fixing the county on one date makes withholding a single lookup for the whole year — the employer asks once, in January, and does not revisit it.
The consequence is a genuine planning lever, and it cuts both ways.
Suppose two Indiana counties differ by a full percentage point — not unusual given the published spread. On $84,000 of Indiana taxable income that is $840 a year.
| Move | Effect |
|---|---|
| From a high-rate county to a low one, in December | You pay the low rate for the whole following year |
| The same move in January | You pay the high rate for another full year |
| From low to high, in December | You start paying the high rate a year early |
| From low to high, in January | You keep the low rate for that whole year |
A move completed a few days either side of January 1 changes a full year's county tax. That is a rare case where a calendar date genuinely decides a tax outcome, and it is worth knowing if a move is already planned for around the turn of the year.
What it does not let you do is game your residence — the test is where you actually lived, and Indiana's rule is a simplification of administration rather than an invitation to arrange a nominal address.
12. Two Indiana workers, same salary
The state figure is identical for both. The county is not, and the gap is larger than the state tax difference between many pairs of states.
A resident of a 1% county earning $85,000. State $2,478, county about $840, combined $3,318.
A resident of Brown County at 2.5234%, same salary. State $2,478, county about $2,120, combined $4,598.
A difference of $1,280 a year — around $107 a month — between two Indiana residents doing identical work. For comparison, that is more than the entire state income tax difference between Indiana and Ohio.
And a third case worth naming. Someone who lived in Illinois on January 1 and moved to Indiana in March works under a different rule for that year: with an out-of-state residence on the determination date, their county of principal work location applies instead of their county of residence. That is the one situation where an Indiana worker's county tax follows their job rather than their home, and it applies for that year only.
The general lesson is the one this whole series keeps arriving at: in a state with a local income tax, the state figure is a partial answer, and the size of the missing part varies more than the state figures do between states.
13. What Indiana's structure means for lower earners
A low flat rate on a nearly-unsheltered base has a particular effect at the bottom of the income range, and it is worth seeing because it inverts the usual reading of "low-tax state."
At $30,000 of salary, Indiana's taxable income is $29,000 after the $1,000 exemption. The state takes $856, and a 2% county takes roughly $580 — a combined $1,436, or about 4.8% of gross.
Set that against states with much higher headline rates:
| State | Headline rate | State tax on $30,000 |
|---|---|---|
| Ohio | 2.75% top | $109 — only income above $26,050 is taxed |
| California | up to 12.3% | $222 |
| Indiana | 2.95% flat | $856 |
California's top rate is more than four times Indiana's and it takes about a quarter as much at this income, because it shelters $5,706 and then taxes the first slices at 1% and 2%. Ohio's zero bracket means only $3,950 of that salary is taxed at all, so it takes $109 — an eighth of Indiana's figure, on a state whose top rate is lower than Indiana's.
A flat rate is regressive relative to a graduated one, and a small exemption makes it more so. Indiana's $1,000 shelter is among the smallest in the country, so nearly the whole of a modest salary is taxed at the full rate — while the county tax adds its own layer with no graduation whatsoever.
This is the honest counterweight to Indiana's fifth-lowest ranking. The state is genuinely inexpensive for middle and higher earners, and it is not especially cheap for someone earning $30,000. The ranking is computed at $85,000, and rankings computed at different incomes would order these states differently.
Frequently asked questions
What is Indiana's income tax rate? A flat 2.95% on adjusted gross income after exemptions, with a $1,000 personal exemption and no standard deduction. Every county adds its own income tax on top.
How much is take-home pay on $85,000 in Indiana? $66,150 for a single filer before county tax, after $9,870 federal income tax, $6,503 FICA and $2,478 Indiana state tax. At a 2% county rate the county takes roughly $1,680 more, bringing take-home to about $64,470.
Which Indiana counties have an income tax? All of them. County income tax councils set the rates and revise them frequently — six counties changed between two recent issues of Departmental Notice #1.
Does my county depend on where I live or where I work? Where you lived on January 1 of the year. Your county of principal work location applies only if you lived outside Indiana on that date. Work location otherwise does not matter, which is the opposite of Ohio's rule.
What happens if I move counties mid-year? Nothing, for that tax year. The county is fixed on January 1, so you pay the rate of the county you lived in on that date for the entire year — including income earned after the move.
Why do some county rates have six decimal places? Because that is how the Department publishes them. Brown County is 0.025234, Carroll 0.024733, Jasper 0.02864 and Whitley 0.016829. Rounding introduces error that compounds across a year of withholding, so use the published precision.
Is Indiana cheaper than Illinois? On the state figure, by $1,585 at $85,000. On the combined figure, barely — an Indiana resident in a 2% county pays roughly $4,158 against Illinois's $4,063, and Illinois has no local income tax layer.
Does Indiana tax retirement income? It exempts Social Security and taxes 401(k) and IRA distributions at 2.95% plus the county rate. Deductions exist for certain military and railroad retirement income and for some older taxpayers subject to income limits.
How much do Indiana counties differ from each other? Enough to matter. A resident of a 1% county on $85,000 pays roughly $3,318 combined; a Brown County resident at 2.5234% pays about $4,598. That $1,280 gap is larger than the entire state income tax difference between Indiana and Ohio.
Can I lower my county tax by moving? Only with timing. Because the county is fixed on January 1, a move completed in late December takes effect for the whole following year, while the same move in January leaves you on the old county's rate for another twelve months. The test is where you genuinely lived, not a nominal address.
What to do next
Indiana's state figure is simple and incomplete. Find your county's rate at full precision, and if you are moving counties, check the calendar.
- Indiana take-home pay calculator — every deduction separated, with the county tax named rather than guessed.
- Your Paycheck in the USA in 2026 — all fifty states on one salary.
- Take-Home Pay in Michigan — the neighbouring flat-tax state with a very different local structure.
- Indiana rent affordability — what the take-home actually supports.
- 50/30/20 budget calculator — built on take-home rather than salary.
Every figure on this site is sourced and dated. How we source every number.
Figures in this article are illustrations computed by this site's own tax engine for tax year 2026, on a single filer with one personal exemption, no dependents and no pre-tax deferrals unless stated. Federal figures come from IRS Revenue Procedure 2025-32 and the Social Security Administration; Indiana figures from this site's sourced 50-state dataset, citing the Department of Revenue's Departmental Notice #1. County income taxes are named but never included in any total; county figures quoted here are illustrative applications of a stated rate rather than a full county calculation, and county rates change frequently. This is general education and not tax advice; for your own situation consult a licensed tax professional.