Navigating the complexities of state taxes can be daunting, but understanding Indiana's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Hoosier State's tax system, from income and sales taxes to property taxes and retirement benefits.
Indiana state tax: Overview
When it comes to taxes, Indiana is a bit of a mixed bag. The state has a flat income tax rate of 3.05%, which sounds simple enough, but many counties add local income taxes, so what you actually pay can vary depending on where you live.
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On the flip side, Indiana’s sales and property taxes help even things out. While the general sales tax rate is relatively high, the state’s median property tax rate is on the lower side compared to many others.
Ultimately, some of the higher income and sales taxes are offset by more manageable property taxes.
[Data for this state tax guide was gathered from a number of sources including the U.S. Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Indiana income tax rate
Indiana has a flat rate individual income tax rate of 3.05%, and some jurisdictions collect local income taxes.
Indiana retirement taxes
Indiana has a low flat tax rate for taxable income, which can be beneficial, since the state only exempts Social Security.
- Social Security: Not taxable
- 401(k) and IRA Distributions: Taxable
- Pensions: Taxable
Indiana sales tax
Indiana's state sales tax rate is 7%. There are no local sales taxes in the state.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
How much is property tax in Indiana?
In Indiana, the median property tax rate is 0.71% of owner-occupied housing value, according to the Tax Foundation.
Indiana Property Tax Breaks for Retirees
Indiana offers two property tax breaks for older adults aged 65 or over. One is the "over 65 or surviving spouse deduction" and the other is the state's "over 65 circuit breaker credit."
Indiana gas tax
Product | Tax Amount |
|---|---|
Gasoline | $0.18 per gallon |
Diesel | $0.16 per gallon |
Source: The Sales Tax Handbook
Indiana taxes on alcohol and tobacco
Indiana Tobacco Taxes
Product | Tax Amount |
|---|---|
Cigarettes | $1 per pack of 20 |
Snuff | $0.09 per one-ounce tin |
Other Tobacco Products | 24% of wholesale price |
Source: The Sales Tax Handbook
Indiana Alcohol Taxes
Product | Tax Amount |
|---|---|
Beer | $0.12 per gallon |
Wine | $0.47 per gallon |
Liquor | $2.68 per gallon |
Source: The Sales Tax Handbook
Indiana estate and inheritance taxes
There are no estate or inheritance taxes in Indiana.
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