Indiana has one of the most business-friendly tax systems in the Midwest with a flat 3.23% state income tax rate, making it an attractive state for both individuals and businesses. Our free Indiana paycheck calculator shows your exact take-home pay after federal taxes, Indiana state tax, and FICA deductions. Whether you're considering a move to the Hoosier State, comparing job opportunities in Indianapolis or Fort Wayne, or budgeting your current Indiana salary, get accurate results based on 2025 tax rates.
Indiana Tax System Overview
Indiana uses a simple flat tax system that's easy to understand:
2025 Indiana Tax Structure
| Tax Type | Rate | Details |
|---|---|---|
| State Income Tax | 3.23% | Flat rate on all income levels |
| County Income Tax | 0.5% - 3.38% | Varies by county |
| Combined Average | ~5.5% | State + typical county rate |
- Flat Rate: 3.23% applies to all income levels equally
- Standard Deduction: $2,000 (single), $4,000 (married filing jointly)
- Personal Exemption: $1,000 per person
- County Taxes: Additional local income taxes vary by county
Sample Indiana Paycheck Calculations
Here's how much you'll take home at different salary levels in Indiana (state tax only - county taxes add 0.5-3.38%):
$55,000 Annual Salary
- Gross Pay: $55,000
- Federal Tax: $5,379
- IN State Tax: $1,777
- FICA Taxes: $4,208
- Take-Home Pay: $43,636 (79.3%)
- Monthly Net: $3,636
- Bi-weekly Net: $1,679
- Note: County taxes would reduce this further
$75,000 Annual Salary
- Gross Pay: $75,000
- Federal Tax: $8,739
- IN State Tax: $2,423
- FICA Taxes: $5,738
- Take-Home Pay: $58,100 (77.5%)
- Monthly Net: $4,842
- Bi-weekly Net: $2,235
- Note: County taxes would reduce this further
$100,000 Annual Salary
- Gross Pay: $100,000
- Federal Tax: $14,260
- IN State Tax: $3,230
- FICA Taxes: $7,650
- Take-Home Pay: $74,860 (74.9%)
- Monthly Net: $6,238
- Bi-weekly Net: $2,879
- Note: County taxes would reduce this further
Indiana vs. Neighboring States
Compare Indiana's tax burden with surrounding states:
Indiana ($75k salary)
- Take-home: ~$56,000-58,000
- Effective rate: 24-25%
- Total state/local tax: $3,100-4,500
- Low-moderate tax burden
Illinois ($75k salary)
- Take-home: $57,335
- Effective rate: 23.6%
- State tax: $3,188
- Similar burden
Understanding Indiana's County Income Taxes
How County Taxes Work
Indiana is unique in allowing counties to impose additional income taxes:
- County Income Tax: Ranges from 0.5% to 3.38% depending on county
- Economic Development Tax: Some counties add additional development taxes
- Property Tax Relief: County income taxes often fund property tax relief
- Where You Work: You pay based on where you work, not where you live
Major County Rates
County income tax rates for major Indiana areas:
- Marion County (Indianapolis): 2.68%
- Lake County (Gary): 3.38% (highest in state)
- Hamilton County (Carmel): 1.25%
- Allen County (Fort Wayne): 1.35%
Indiana's Business-Friendly Environment
Indiana's tax system supports business growth:
- Low Corporate Tax: Competitive corporate income tax rates
- Right-to-Work State: Business-friendly labor laws
- Economic Incentives: Various tax incentives for businesses
- Central Location: Strategic location for distribution and manufacturing
Indiana Retirement Tax Considerations
Indiana's retirement tax treatment:
- Social Security: Not taxed by Indiana
- Military Retirement: Up to $6,250 deduction for military retirement
- Pension Income: Generally subject to state income tax
- 401(k) & IRA: Withdrawals taxed at flat 3.23% rate
Frequently Asked Questions
Do I pay county income tax where I live or work?
You pay county income tax based on where you work, not where you live. If you work in multiple counties, the rules can be complex, so consult a tax professional.
How does Indiana's flat tax compare to other states?
Indiana's 3.23% flat rate is very competitive, especially when combined with reasonable county rates. It's much simpler than progressive systems and generally results in lower taxes for middle and high earners.
Is Indiana retirement-friendly?
Indiana is moderately retirement-friendly. Social Security isn't taxed, and there are some military retirement benefits, but most other retirement income is subject to the flat 3.23% rate.
Tax Planning Tips for Indiana Residents
Consider County of Employment
Since county income tax is based on where you work, consider this when choosing job locations. County rates vary significantly across Indiana.
Maximize Pre-Tax Benefits
With Indiana's flat rate system, pre-tax contributions to retirement accounts provide consistent percentage savings regardless of income level.
Take Advantage of Simplicity
Indiana's flat tax system makes tax planning straightforward. Focus on maximizing deductions and understanding your total state and county burden.
Ready to Calculate Your Indiana Take-Home Pay?
Use our calculator above to estimate your state tax burden. Remember to add county taxes for your total Indiana tax burden.