Indiana State Tax Rate 2025 Guide – If you live in Indiana, earn income in the state, or are considering a move to the Hoosier State, understanding the Indiana state tax rate 2025 is essential for accurate budgeting and tax planning. Indiana offers one of the simplest tax structures in the U.S. with a flat individual income tax, a uniform statewide sales tax, and locally administered property taxes.
This comprehensive 2025 guide covers the latest Indiana state income tax rate, county add-ons, sales tax, property taxes, filing requirements, deductions, and upcoming changes. All information is drawn from official sources including the Indiana Department of Revenue (DOR) and the Tax Foundation.
Indiana State Income Tax Rate for 2025
Indiana imposes a flat state income tax rate of 3.00% on adjusted gross income (AGI) for tax year 2025. This represents a reduction from the 3.05% rate that applied in 2024. The flat rate applies to all taxpayers regardless of income level or filing status.
Key facts about the 2025 Indiana income tax:
- Base: Starts with your federal AGI, with Indiana-specific add-backs and subtractions.
- Who must file: Full-year residents, part-year residents, and non-residents with Indiana-source income (generally if AGI exceeds $1,000).
- Withholding: Employers use the state rate plus your county’s rate for payroll withholding.
This flat structure makes Indiana’s individual income tax one of the most straightforward in the nation.
Indiana County Income Taxes in 2025
In addition to the 3% state rate, most Indiana counties impose a local county income tax (also called county adjusted gross income tax). These rates vary by county and are added to the state rate.
- Average effective county rate: approximately 0.49% of AGI (based on the latest available data).
- Rates are set locally and can change in January and October each year.
- A full list of 2025 Indiana county income tax rates and codes is available in the official DOR chart.
Example: A taxpayer in a county with a 1.5% local rate would pay a combined effective rate of 4.5% (3% state + 1.5% county). Always verify your county’s exact rate using the latest DOR Departmental Notice or county tax rate PDF.
Indiana Sales Tax Rate 2025
Indiana maintains a flat statewide sales tax rate of 7% with no local add-on sales taxes. This uniform rate applies to most retail purchases of tangible personal property and certain services across the entire state.
Common exemptions from Indiana’s 7% sales tax include:
- Most unprepared food and food ingredients (groceries).
- Prescription drugs and many medical supplies/equipment.
- Agricultural items and certain manufacturing/production equipment.
- Sales to government agencies, qualifying nonprofits, and purchases for resale.
Note: Prepared food (restaurant meals, takeout), candy, soft drinks, and most clothing are taxable. Use tax applies at the same 7% rate if you buy taxable items out-of-state and bring them into Indiana.
Indiana Property Tax Rates in 2025
Unlike income and sales taxes, Indiana does not have a statewide property tax rate. Property taxes are set and collected at the local level (counties, cities, towns, townships, schools, and special districts).
Key 2025 property tax highlights:
- Statewide average effective property tax rate: approximately 0.74%–0.76% of assessed value (one of the lower rates nationally).
- Rates are expressed per $100 of net assessed value and vary significantly by location and property type.
- 2025 saw major property tax reform legislation (Senate Enrolled Act 1) that introduced new deductions and exemptions, particularly for homeowners, rental properties, and certain personal property. These changes are phasing in and will affect future bills.
Homeowners should use the official Indiana DLGF Tax Bill Estimator or check their county assessor’s office for exact rates and available deductions (homestead, supplemental homestead, etc.).
Major Tax Changes and Future Reductions in Indiana
2025 changes include the scheduled drop in the state income tax rate to 3.00%. Additional legislative updates refined add-backs, credits, and deductions for individual filers.
Future reductions (already enacted):
- 2026: 2.95%
- 2027 and beyond: 2.90% (with possible further conditional reductions starting in 2030 if revenue targets are met)
These cuts continue Indiana’s multi-year plan to deliver tax relief to residents.
How to File Your 2025 Indiana State Taxes?
Filing is straightforward for most taxpayers:
- Form: Full-year residents use IT-40. Part-year and non-residents use IT-40PNR or IT-40RNR.
- Deadline: April 15, 2026 (or the next business day).
- Electronic filing: Strongly recommended via INTIME (Indiana’s free online portal) or approved tax software.
- Required schedules: Most filers must include Schedules 1, 2, 3, 5, 6, 7, CT-40, and IN-DEP when applicable.
You can claim credits for Indiana withholding, estimated payments, and certain tax credits (e.g., Earned Income Credit, which Indiana fully conforms to the federal version).
Popular Deductions and Credits for Indiana Taxpayers in 2025
Indiana offers several ways to lower your tax bill:
- Indiana-specific deductions and subtractions (detailed in the IT-40 instructions).
- Dependent exemptions and certain retirement/pension deductions.
- Tax credits for college savings contributions, adoption, and other targeted incentives.
- Property tax relief through homestead deductions and the new 2025 reform deductions.
Review the official 2025 IT-40 Income Tax Instruction Booklet for the complete list.
Frequently Asked Questions About Indiana State Tax Rate 2025
Is Indiana’s income tax flat?
Yes — 3.00% for 2025 on adjusted gross income.
Does Indiana have local sales taxes?
No. The sales tax is a flat 7% everywhere in the state.
Are groceries taxed in Indiana?
Most unprepared food items are exempt.
How do I find my county income tax rate?
Download the latest 2025 County Income Tax Rates and Codes PDF from the DOR website.
When will the next income tax rate cut happen?
The rate drops to 2.95% in 2026 and 2.90% in 2027.
Final Tips for Indiana Taxpayers in 2025
The Indiana state tax rate 2025 remains competitive thanks to the flat 3% income tax, 7% sales tax, and relatively low effective property taxes. Staying informed about county rates, available deductions, and upcoming reductions will help you minimize your tax liability.
For the most accurate and personalized advice, visit the official Indiana Department of Revenue website (in.gov/dor), download the current IT-40 booklet, or consult a qualified tax professional or CPA. Tax laws can change, and individual circumstances vary.
This guide is for informational purposes only and is not a substitute for professional tax advice. Stay up to date by checking official DOR announcements throughout the year.
Last updated based on official 2025 tax information from the Indiana DOR and Tax Foundation.