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Indiana Tax Guide: Low Flat 3.05% Income Tax

Learn about Indiana's competitive flat income tax rate, county surtaxes, and all state tax obligations for 2025.

3.05%
Flat Income Tax Rate
7.00%
Sales Tax Rate
0.83%
Property Tax Rate
#35
Tax Burden Rank

Tax Overview

Indiana boasts one of the lowest flat income tax rates in the nation at 3.05%, which has been gradually decreasing from 3.23% in recent years. This low state rate makes Indiana attractive for workers and businesses alike. However, Indiana also has county income taxes that range from 0.5% to 2.864%, which are added on top of the state rate. The county you live in determines your total income tax burden.

Sales tax in Indiana is straightforward with a 7% state rate and no local option taxes, making it one of the few states with a uniform sales tax rate statewide. This simplicity is beneficial for businesses and consumers alike. Indiana does not tax groceries at the state level, and prescription medications are also exempt.

Property taxes in Indiana are capped by constitutional amendment at 1% of assessed value for homesteads, 2% for other residential property and agricultural land, and 3% for commercial property. These caps, combined with a standard homestead deduction, keep property taxes relatively affordable. Indiana also offers additional deductions for senior citizens, veterans, and individuals with disabilities.

Income Tax

Indiana has one of the lowest flat state income tax rates. County income taxes of 0.5% to 2.864% are added on top, varying by county of residence.

Flat Tax Rate: 3.05%

Sales Tax

State Rate7.00%
Avg. Local Rate0.00%
Combined Rate7.00%

Property Tax

Effective Rate0.83%
Median Annual Bill$1,371

Key Deductions in Indiana

  • ✓Renter's deduction of up to $3,000 in rent paid
  • ✓Indiana 529 plan contribution credit (20% of contributions, up to $1,500)
  • ✓Unified tax credit for the elderly (age 65+)
  • ✓Homeowner's residential property tax deduction
  • ✓Military service and veteran deductions
  • ✓Earned income credit (10% of federal EITC)

Filing Information

Filing Deadline: April 15

Tax Authority: Indiana Department of Revenue

Phone: (317) 232-2240

Website: https://www.in.gov/dor

Frequently Asked Questions

What are Indiana county income taxes?
In addition to the 3.05% state rate, Indiana counties levy their own income tax at rates ranging from 0.5% to 2.864%. The rate depends on where you live, not where you work. This means your total state and local income tax rate can range from about 3.55% to nearly 6%.
Does Indiana tax Social Security benefits?
No, Indiana does not tax Social Security benefits at the state level. Most other forms of retirement income are taxable, though the state offers an elderly credit for qualifying taxpayers age 65 and older.
Are groceries taxed in Indiana?
No, most grocery food items are exempt from Indiana's 7% sales tax. Prepared foods, candy, and soft drinks are taxable, but unprepared food for home consumption is not.
How do Indiana property tax caps work?
Indiana's constitution caps property taxes at 1% of assessed value for homesteads, 2% for other residential and agricultural property, and 3% for commercial property. If calculated taxes exceed these caps, the excess is automatically removed from your bill.

Neighboring State Guides

MichiganOhioKentuckyIllinois

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