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The Indiana state income tax rate is 2.95% effective January 1, 2026, down from 3.00% in 2025. Indiana is one of few states with a true flat tax — every dollar of taxable income is taxed at the same rate regardless of how much you earn. The rate is scheduled to decrease further to 2.9% by 2027 per Indiana law enacted in 2023.

Your county tax rate is determined by your county of residence on January 1 of the tax year. If you move during the year, your withholding does not change — the county you lived in on New Year's Day governs your rate for the entire year. If you lived out-of-state on January 1 but work in an Indiana county, the county where you work on January 1 applies.

Form WH-4 is Indiana's equivalent of the federal W-4. It tells your employer how much Indiana state and county income tax to withhold. Each exemption you claim on WH-4 reduces your Indiana taxable income by $1,000. You can claim an exemption for yourself, your spouse (if filing jointly), and each qualifying dependent. You should submit a new WH-4 whenever your personal situation changes.

No — Indiana does not tax overtime pay at a different rate. Overtime wages are included in your regular gross income and taxed the same way. However, because overtime increases your gross income, it may push you into a higher federal income tax bracket. Indiana's flat 2.95% state rate means more gross income always results in proportionally more state tax — never a higher rate.

Traditional 401(k) contributions are made pre-tax, which reduces your federal taxable income. They also reduce your Indiana state and county taxable income. For 2025, you can contribute up to $23,500 per year ($31,000 if age 50 or older with catch-up contributions). Roth 401(k) contributions, by contrast, are after-tax and do not reduce your taxable income now but grow tax-free.

As of 2026, several Indiana counties have rates near the maximum, including Pulaski County (2.9%), Jasper County (2.9%), Wabash County (2.9%), and Parke County (2.85%). The lowest county rates include Porter County (0.5%) and Perry County (0.67%). Marion County (Indianapolis) is 2.0%. You can see every county's rate in the sidebar or use our calculator's county dropdown.

Yes. Indiana has income tax reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. If you live in one of these states but work in Indiana, you only pay income tax to your home state — not to Indiana. You'll need to file Form WH-47 (Certificate of Residence) with your Indiana employer to stop Indiana state withholding. Note that Indiana county income tax may still apply in some situations.

Military retirement pay is 100% exempt from Indiana income tax — there is no age requirement. Active duty military pay earned while serving outside Indiana is also generally exempt. Survivor Benefit Plan (SBP) payments are similarly not taxed by Indiana. This is one of Indiana's most significant military tax benefits. Our calculator does not currently handle military-specific deductions; consult the Indiana DOR or a tax professional for complex military scenarios.