Indiana Payroll Calculator

Indiana Tax Law Citations (2026)

Indiana adjusted gross income tax derives from Indiana Code (IC) Title 6, Article 3 — "State Income Taxes." Withholding requirements are codified at IC 6-3-4-8 ("Employer required to withhold tax"), with rate authority under IC 6-3-2-1. County income taxes ("LIT" — Local Income Tax, formerly CAGIT/COIT/CEDIT consolidated under HEA 1485, 2015) are governed by IC 6-3.6. The Indiana Department of Revenue ("DOR") publishes Departmental Notice #1 annually with the master county-rate table. Official portal: in.gov/dor/; Departmental Notice #1: in.gov/dor/files/dn01.pdf.

2026 income tax bracket structure. Indiana imposes a single flat state rate of 3.0% for tax year 2025 (filed in 2026), dropping to 2.95% for tax year 2026 and scheduled to decline further to 2.9% by 2027 under HEA 1002, 2022. There is no graduated bracket schedule. Counties additionally levy LIT rates ranging from 0.50% (LaPorte and several others) to 3.38% (Pulaski County) in 2026, applied on the same Indiana adjusted gross income base. Combined effective state-plus-county rates fall in the 3.45% to 6.33% range.

Recent legislation (2024–2026). HEA 1002 (2022) set the multi-year state rate reduction schedule (3.15% TY2023, 3.05% TY2024, 3.00% TY2025, 2.95% TY2026, 2.9% TY2027). HEA 1265 (2025) adjusted six county LIT rates effective January 1, 2026 (per the Payroll.org news bulletin). The 2026 Departmental Notice #1 is the controlling document for employer withholding by county of residence (and sometimes county of work).

Indiana 2026 Payroll-Specific Numbers

• State Unemployment Insurance (SUI): Indiana Department of Workforce Development administers UI under IC 22-4. For 2026, experience-rated employer rates range from 0.50% to 7.40% on the first $9,500 of wages per employee (Indiana UI taxable wage base unchanged). New employers pay a flat 2.50% for the first three calendar years; new construction employers pay slightly higher.
• Workers' Compensation: Indiana Workers' Compensation Board administers the system under IC 22-3. Rates are NCCI-derived; 2026 voluntary loss-cost level is approximately $0.36 per $100 for clerical (Class 8810). Indiana is a relatively low-cost workers' comp state.
• Disability Insurance: Indiana does not impose a state-mandated short-term disability program.
• Local Income Tax (LIT) — Critical for Payroll: Every Indiana county imposes an income tax under IC 6-3.6, on the same base as the state tax. Withholding is based on county of principal residence as of January 1 of the tax year (or county of principal employment for non-residents). Notable 2026 rates: Marion (Indianapolis) 2.02%, Lake 1.50%, Allen 1.69%, Hamilton 1.10%, Vanderburgh 1.20%, Pulaski 3.38% (highest), LaPorte 0.50% (among lowest). Employees who move counties mid-year keep their January-1 county rate for the full year.
• Additional Notable Items: Indiana's adjusted gross income definition (IC 6-3-1-3.5) closely follows federal AGI but adds back municipal-bond interest from non-Indiana issuers and disallows certain federal deductions like state and local taxes. The Renter's Deduction (up to $3,000) and the CollegeChoice 529 Credit (20% of contributions up to $1,500) are post-paycheck items.

Indiana BLS Wage Data (May 2024 OEWS)

Per the BLS OEWS program, Indiana's statewide median annual wage was approximately $46,690 in May 2024, slightly below the U.S. median of $49,500 — consistent with the state's mix of manufacturing, agriculture, and logistics employment. Source: bls.gov/oes/current/oes_in.htm. Indiana ranks highest in the nation for production-occupation employment share (11.3% of state employment per BLS May 2024 release). Indianapolis-Carmel-Anderson MSA median wages run around $51,500. Top occupations by employment include registered nurses (~$80,400), heavy truck drivers (~$56,200), and assemblers/fabricators (~$42,800).

Practitioner Insight: What Sets Indiana Apart

What sets Indiana apart for payroll calculations is the 92-county Local Income Tax (LIT) overlay applied uniformly on top of a flat state rate. Because every Indiana county levies an LIT — ranging more than 6x from 0.50% to 3.38% — an employee's residential ZIP code matters more for net pay than gross salary in most cases. Multi-state employers running payroll for Indiana workers must implement county-level withholding tables that apply the resident's January-1 county rate, not the work-county rate, with a complex tiebreaker if the worker lacks an Indiana residence (work-county rate applies). Mid-year residential moves do not change withholding for the remainder of the year — a quirk that catches many out-of-state HR teams. The flat-rate-plus-county architecture also means Indiana's marginal tax wedge is essentially identical at $30,000 and $300,000 of income, which is unusual and simplifies executive compensation planning compared to graduated-bracket states.

Editor's Note

Last reviewed by Mustafa Bilgic on 2026-05-05. Indiana state tax law verified against the Indiana Department of Revenue (in.gov/dor/), Departmental Notice #1 2026 county rate chart (in.gov/dor/files/dn01.pdf), Indiana Department of Workforce Development (in.gov/dwd/), and IRS Publication 15-T (2026 edition). Mustafa Bilgic is the sole proprietor of PayrollCalculator.us, registered at Malazgirt No: 225, 02000 Adıyaman, Türkiye.

Citations & Official Sources

1. Indiana Code Title 6, Article 3 (State Income Taxes) — iga.in.gov/laws/2024/ic/titles/6/articles/3
2. Indiana Code 6-3.6 (Local Income Taxes) — iga.in.gov/laws/2024/ic/titles/6/articles/3.6
3. Indiana Department of Revenue, Individual Taxes — in.gov/dor/i-am-a/individual/
4. Indiana DOR, Departmental Notice #1 (county rate table) — in.gov/dor/files/dn01.pdf
5. Indiana Department of Workforce Development, Employer UI — in.gov/dwd/employers/
6. U.S. Bureau of Labor Statistics, Indiana OEWS May 2024 — bls.gov/oes/current/oes_in.htm
7. IRS Publication 15-T (2026) — irs.gov/pub/irs-pdf/p15t.pdf