Question 1

What is Indiana's state income tax rate for 2025?

Accepted Answer

Indiana has a flat state income tax rate of 3.00% for tax year 2025, following the ratcheting schedule set by Indiana SB 1 (2022), which reduced the rate from 3.15% (2024) to 3.00% (2025). A further scheduled reduction to 2.95% for tax year 2026 is contingent on state general-fund revenue triggers being met. Indiana is one of the ten U.S. states with a flat individual income tax.

Question 2

Do Indiana counties charge additional income tax?

Accepted Answer

Yes. Every Indiana county levies its own Local Income Tax (LIT) on residents' Indiana AGI, ranging from roughly 0.5% to 3.38% depending on the county. LIT rates are set by county councils and can change annually. Combined state-plus-county rates for Indiana residents typically fall between 3.5% and 6.38%. LIT is based on the taxpayer's county of residence on January 1 of the tax year, not on their county of employment.

Question 3

Does Indiana tax Social Security or retirement income?

Accepted Answer

Indiana fully exempts Social Security benefits from state income tax. Military retirement pay has been fully exempt from Indiana state income tax beginning tax year 2022 (HEA 1010, 2019). Public and private pensions, 401(k) distributions, and IRA withdrawals are generally taxable at Indiana's flat state rate. Indiana provides a specific federal-government retirement income deduction of up to $16,000 per year for taxpayers age 60 or older.

Question 4

What is Indiana's standard deduction for 2025?

Accepted Answer

Indiana does not offer a standard deduction. Instead, Indiana provides a personal exemption of $1,000 per taxpayer and per dependent, plus an additional $1,500 exemption for each dependent child. Indiana taxable income equals Indiana AGI (federal AGI with state add-backs and subtractions) minus these personal exemptions.

Question 5

Does Indiana have reciprocal agreements with other states?

Accepted Answer

Yes. Indiana has reciprocal income-tax agreements with five neighboring states: Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. Residents of these states who work in Indiana pay income tax only to their home state on their Indiana wages, and vice versa. Note that Indiana county LIT is not covered by these reciprocal agreements, so cross-border commuters may still owe local Indiana tax based on their county of residence.

Indiana Income Tax Calculator

Indiana Tax Calculator

Tax Results

About Indiana Income Tax

More Tax & Financial Tools