Indiana state income tax
Indiana has a state income tax. It is flat, with a top marginal rate of 2.95%. 2.95% flat state rate for 2026, phased down from 3.05% (2024) to 3.0% (2025) to 2.95% (2026); frozen at 2.90% for 2027-2029 under the original HEA 1001 (2023) schedule as extended/accelerated by SB 451 (2025), with further 0.05-point cuts possible every other year from 2030 through 2043 only if state general-fund revenue-growth triggers are met. Every Indiana county also imposes a single consolidated Local Income Tax (LIT, IC 6-3.6) on residents and certain nonresidents, collected alongside the state tax, this is one combined per-county rate, NOT a stack of separate 'general' and 'property tax relief' levies. Per DOR Departmental Notice #1 (eff. Jan. 1, 2026) and the current county rate chart, county LIT rates range from 0.50% (Porter County) to 3.00% (Randolph County); Marion County's rate is 2.02%. Six counties (Carroll, Grant, Greene, Howard, Shelby, Union) raised their rates effective Jan. 1, 2026, but the statewide min/max and Marion's rate are unaffected by that change. Capital gains are taxed as ordinary income (no special lower rate).
Does Indiana have a state income tax?
Yes. Indiana taxes individual income on a flat schedule topping out at 2.95%. 2.95% flat state rate for 2026, phased down from 3.05% (2024) to 3.0% (2025) to 2.95% (2026); frozen at 2.90% for 2027-2029 under the original HEA 1001 (2023) schedule as extended/accelerated by SB 451 (2025), with further 0.05-point cuts possible every other year from 2030 through 2043 only if state general-fund revenue-growth triggers are met. Every Indiana county also imposes a single consolidated Local Income Tax (LIT, IC 6-3.6) on residents and certain nonresidents, collected alongside the state tax, this is one combined per-county rate, NOT a stack of separate 'general' and 'property tax relief' levies. Per DOR Departmental Notice #1 (eff. Jan. 1, 2026) and the current county rate chart, county LIT rates range from 0.50% (Porter County) to 3.00% (Randolph County); Marion County's rate is 2.02%. Six counties (Carroll, Grant, Greene, Howard, Shelby, Union) raised their rates effective Jan. 1, 2026, but the statewide min/max and Marion's rate are unaffected by that change.
| Item | Indiana |
|---|---|
| State income tax | Yes, flat |
| Top marginal rate | 2.95% |
| Capital gains | Taxed as ordinary income, up to 2.95% |
| State sales tax | 7% |
| Avg. property tax rate | 0.76% of home value |
| Estate / inheritance tax | None |
How does Indiana tax capital gains?
Indiana has no separate, lower rate for capital gains. They are taxed as ordinary income at the same rates as your wages, up to 2.95%, on top of federal capital gains tax. See how capital gains tax works in 2026.
What about retirement income in Indiana?
Retirement income is taxed differently from wages in many states. For how Indiana treats Social Security, pensions, and 401(k)/IRA withdrawals, see Indiana retirement taxes.
Sources
- Indiana income tax rates and brackets: Indiana Department of Revenue / Taxation.
- Indiana capital gains treatment: Indiana tax authority.
- Indiana sales tax: Indiana Department of Revenue.