Indiana State Income Tax Withholding
Last Updated: January 2026
Overview
Indiana uses a flat state income tax rate, but uniquely among states, all 92 Indiana counties impose their own county income tax. Employers must withhold both state and county income taxes for Indiana employees.
2026 Tax Rates
State Tax
| Tax Type | Rate |
|---|---|
| State Flat Tax Rate | 2.95% |
Note: The state rate is scheduled to decrease to 2.90% for tax year 2027.
County Tax
All 92 Indiana counties impose a county income tax. Rates vary by county and change periodically.
| County Tax Range | Rate |
|---|---|
| Lowest County Rate | Approximately 0.5% |
| Highest County Rate | Approximately 3.0% |
| Average County Rate | Approximately 1.5% |
Important: County tax rates change frequently. Consult the Indiana Department of Revenue for current rates by county.
Deductions and Exemptions
Personal Exemption
| Exemption Type | Amount |
|---|---|
| Personal Exemption | $1,000 |
| Dependent Exemption | $1,500 |
| Additional (65+ or blind) | $1,000 |
Indiana does not have a standard deduction but provides personal and dependent exemptions.
Special Considerations
State W-4 Form
Indiana requires Form WH-4 (Employee's Withholding Exemption and County Status Certificate). This form is critical because it determines:
- State withholding exemptions
- County of residence (for county tax rate)
- County of employment (if different)
County Tax Withholding
The employee's county of residence determines the county tax rate withheld, not the county where they work. Form WH-4 must identify the correct county.
County Rate Updates
Indiana publishes updated county tax rates periodically. Employers should:
- Check for rate updates at least quarterly
- Apply new rates as specified by the Indiana DOR
- The DOR publishes rate changes with effective dates
Common County Rates (Examples)
| County | Approximate Rate |
|---|---|
| Marion (Indianapolis) | 2.02% |
| Lake | 1.5% |
| Allen (Fort Wayne) | 1.59% |
| Hamilton | 1.0% |
Note: These are example rates only. Always verify current rates with the Indiana Department of Revenue.
Reciprocal Agreements
Indiana has reciprocal income tax agreements with:
- Kentucky
- Michigan
- Ohio
- Pennsylvania
- Wisconsin
Residents of these states working in Indiana are exempt from Indiana state income tax withholding. Employees must file a certificate of non-residence (Form WH-47) to claim the exemption. County tax withholding may still apply.