Indiana Tax Guide

Indiana state flag on a flag pole against the sky.

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 2.95% (2026), which sounds simple enough, but many counties add local income taxes, so what you actually pay can vary depending on where you live.

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

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Indiana had a flat rate individual income tax rate of 3.05% for 2025, and some jurisdictions collect local income taxes. That rate falls to 2.95% for 2026 (returns filed in 2027).

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% (0.77% for 2026) 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."

Property tax changes for 2026

The standard homestead deduction has been reduced from $48,000 to $40,000 in 2026.
The supplemental homestead deduction increases from 35% to 43%.
Beginning in 2026, homeowners can receive a credit equal to 10% of their property tax bill, capped at $300.
Eligible homeowners can get extra property tax credits that can stack with their other credits. These include:
- $150 for qualifying fixed-income seniors
- $125 for blind or disabled homeowners
- $250 for disabled veterans