Indiana Tax Brackets 2026 Guide – Indiana does not use traditional progressive tax brackets like many other states. Instead, it applies a flat individual income tax rate to Indiana adjusted gross income (AGI). For tax year 2026 (income earned January 1–December 31, 2026, filed in 2027), the state rate is 2.95% — down from 3.00% in 2025.
All 92 counties also impose a local income tax (flat rate per county), so your total effective rate is the state rate plus your county rate. This guide breaks down everything U.S. taxpayers need to know about Indiana taxes in 2026, including how to calculate your liability, exemptions, other taxes, and filing requirements.
Indiana State Income Tax Rate for 2026
The Indiana Department of Revenue (DOR) sets the flat state adjusted gross income tax rate at 2.95% for 2026. It will drop further to 2.90% in 2027, with additional revenue-triggered reductions possible starting in 2030.
This flat rate applies to all income levels and all filing statuses after allowable add-backs, deductions, and exemptions. There are no income brackets that increase the rate as earnings rise.
Key fact: The rate reduction took effect January 1, 2026, and is already reflected in 2026 payroll withholding (state supplemental wage withholding also drops to 2.95%).
How Indiana’s Flat Tax System Works in 2026?
Indiana starts with your federal adjusted gross income (AGI) from Form 1040 and makes state-specific adjustments:
- Add back certain items (Schedule 1).
- Subtract allowable Indiana deductions (Schedule 2).
- Subtract personal and dependent exemptions (Schedule 3).
- Apply the 2.95% state tax rate to the result.
- Add your county income tax (calculated on Schedule CT-40).
Result: Your total Indiana income tax liability = state tax + county tax.
Unlike federal taxes, Indiana does not offer a standard deduction or itemized deductions. It relies entirely on fixed exemptions to reduce taxable income.
Indiana County Income Tax Rates 2026
Every Indiana county levies its own flat income tax. Employers withhold both state and county taxes based on your county of residence (or principal work location if you live out-of-state) as of January 1, 2026.
County rates generally range from 0.5% to 3.0%. Six counties raised rates effective January 1, 2026:
- Carroll County → 2.4733%
- Grant County → 2.75%
- Greene County → 2.35%
- Howard County → 2.35%
- Shelby County → 1.7%
- Union County → 2.75%
For the full current list of all 92 county rates (including withholding constants), see the official Departmental Notice #1 on the Indiana DOR website. Rates are for withholding purposes but closely track the actual tax you owe.
Pro tip: Use the two-digit county code from the back of Schedule CT-40 when filing.
Indiana Personal Exemptions & Deductions for 2026
Indiana reduces your taxable income with these fixed exemptions (amounts have remained stable in recent years):
- $1,000 per taxpayer (self)
- $1,000 for spouse (joint return; limited rules for married filing separately)
- $1,000 per qualifying dependent
- Additional $1,500 per qualifying child (under age 19 or full-time student under 24); $3,000 for first-time claimed qualifying children
- $3,000 per adopted child (in addition to other exemptions)
- Extra $1,000 per person age 65+ or blind
- Extra $500 for low-income seniors (AGI under $40,000 single / $20,000 separate)
Exemptions are claimed on Schedule 3 of Form IT-40 and are prorated for part-year residents.
Other deductions (e.g., net operating losses, certain add-back reversals) appear on Schedule 2. Always check the latest IT-40 instructions for any 2026-specific changes.
Other Major Taxes in Indiana for 2026
- Sales Tax: Flat 7% state rate. No local sales taxes. Groceries, prescription drugs, and certain items remain exempt or reduced.
- Property Tax: Varies by county and locality. Indiana caps rates and offers homestead deductions (phasing changes may apply). Effective statewide rate on owner-occupied homes is among the lowest in the Midwest.
- Corporate Income Tax: 4.9% flat rate (separate from individual taxes).
- Estate/Inheritance Tax: None.
Indiana remains one of the most tax-friendly states for retirees and families thanks to its low flat income tax and targeted exemptions.
How to File Your 2026 Indiana State Taxes?
- Form: Full-year residents use IT-40.
- Part-year/nonresidents: Use IT-40PNR (or IT-40RNR for wages-only reciprocal states).
- Deadline: April 15, 2027 (or next business day).
- Electronic filing: Free via INTIME or freefile.dor.in.gov. Most software supports Indiana returns.
- Payment options: Direct debit, credit card, or mail check with voucher.
You must include Schedules 1, 2, 3, 5, 6, CT-40, and IN-DEP (if claiming dependents) when applicable.
Withholding tip: Check your 2026 pay stubs — the state withholding rate is now 2.95%. Update your WH-4 form if needed.
Frequently Asked Questions About Indiana Tax Brackets 2026
Does Indiana have tax brackets?
No — it uses a single flat rate of 2.95% plus county tax. There are no income ranges that change the rate.
Will my taxes go down in 2026?
Most residents will see a modest reduction due to the state rate drop from 3.00% to 2.95%, unless offset by a county rate increase.
Do I need to file an Indiana return?
Generally yes if you have Indiana-source income over $1,000 or are a full-year resident.
Are Social Security and retirement income taxed?
Social Security is exempt. Most pensions and retirement income are fully taxable at the flat rate (after exemptions).
Where can I find my county tax rate?
Download the latest Departmental Notice #1 from in.gov/dor or check your W-2 Box 17.
Planning Ahead: Indiana Taxes in 2026 and Beyond
Indiana’s ongoing tax cuts — including the scheduled 2.90% rate in 2027 and potential further reductions — make it increasingly attractive for individuals and families. By understanding the flat 2.95% state rate, your specific county tax, and available exemptions, you can accurately estimate your 2026 liability and maximize savings.
For the most accurate information, always consult the official Indiana DOR website (in.gov/dor), the current-year IT-40 instructions, and Departmental Notice #1. Tax laws can change, and professional advice from a CPA or tax preparer is recommended for complex situations.
Sources: Indiana Department of Revenue (official rates and notices), Tax Foundation 2026 State Income Tax Rates report. All data current as of April 2026.
Save this guide and bookmark the DOR site — it’s your complete resource for navigating Indiana taxes in 2026. Questions? Drop them in the comments or contact the Indiana DOR directly.