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Taxes in Indiana
From flat state and local income taxes to Social Security exemptions and senior property tax relief programs, Indiana’s tax structure blends moderate costs with targeted retirement benefits.
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At a glance:
- Indiana combines a flat income tax with additional local county income taxes, while offering relatively moderate sales and property tax rates compared to many states.
- Retirees benefit from exemptions on Social Security, Railroad Retirement, and military retirement income, though most other retirement income is still subject to state tax.
- The state has no inheritance or estate tax, and seniors may qualify for several property tax deductions and credits that help reduce overall housing costs.
Indiana tax laws are somewhat unconventional. For one, many counties impose their own income tax, in addition to the state levy. Below, we explain various Indiana state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.
For information regarding taxes in other states, see Retirement Taxes by State.
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Indiana Tax Rates
| State Sales Tax | 7% |
| Avg State/Local Sales Tax | 7% |
| Gas Tax | $0.517 per gallon |
| Diesel Tax | $0.35 per gallon |
| Cigarette Tax | $1.32 per pack |
| Income Tax | 3.05% |
| Effective Tax Rate | 3.05% |
| Property Tax | 0.71% |
| Social Security Tax | None |
| Medical/Dental Deduction | Partial |
| Federal Income Tax Deduction | None |
| Retirement Tax | Partial |
Indiana Tax Rates Explained
Indiana Sales Tax
7%, with no local taxes.
Indiana Income Tax
Indiana’s flat individual income tax rate will be reduced to 3.05% in 2025. If special conditions are met, the rate could fall to 2.9% by 2029. Many counties in Indiana also impose their own income taxes.
Indiana Property Taxes
Property taxes in Indiana are administered at the local level with oversight by the Indiana Department of Local Government Finance. The average effective rate is 0.71%, which amounts to $1,864 on a median value home of 260,000.
Indiana offers a homestead credit and two property tax breaks to residents who are age 65 or older.
Over 65 or Surviving Spouse Deduction lowers your home’s assessed value to $14,000 or half the assessed value, whichever is less. The property must be valued at a maximum of $240,000 and a combined adjusted gross income $30,000 or less. This deduction is also available to surviving spouses who are at least 60 years of age and who do not remarry if the spouse was at least 65 years of age when they died.
Indiana’s Over 65 Circuit Breaker Credit limits property tax bills from being raised more than 2% annually. The taxpayer must qualify for the homestead standard deduction on the property both the current and prior year. Adjusted gross income limits are $30,000 or less if a single combined AGI of no more than $40,000. The property value must be $200,000 or less on the homestead portion.
Homeowners are eligible for a homestead deduction of $48,000 or 60% of the assessed value of the homestead, whichever is less. A supplemental 35% deduction is available for homesteads with an assessed value under $600,000, or 25% for a homestead assessed at more than $600,000.
Indiana Retirement Taxes
Social Security and Railroad Retirement benefits are exempt. All other retirement income is taxed at the flat 3.00% Indiana income tax rate. There will be no tax on military retirement benefits beginning in 2022.
Indiana Inheritance and Estate Taxes
Indiana currently has no estate tax or inheritance tax.
Visit the Indiana Department of Revenue for more information.