Taxes in Indiana
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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||$0.50 per gallon|
|Diesel Tax||$0.54 per gallon|
|Cigarette Tax||$0.995 per pack|
|Effective Tax Rate:||3.23%|
|Social Security Tax||None|
|Federal Income Tax Deduction:||None|
Indiana State Taxes Explained
Indiana Sales Tax
7%, with no local taxes.
Indiana Income Taxes
Indiana’s flat individual income tax rate will be reduced to 3.15% in 2023 and 2024. 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 0.86%, which amounts to $1,164 on a median value home.
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 $12,480 or half the assessed value, whichever is less. The property must be valued at a maximum of $182,430 and a combined adjusted gross income $25,000 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 $160,000 or less on the homestead portion.
Homeowners are eligible for a homestead deduction of $45,000 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 3.23% Indiana income tax rate. There will be no tax on military retirement benefits beginning in 2022.
Indiana Estate and Inheritance Taxes
Indiana currently has no estate tax or inheritance tax.
Visit the Indiana Department of Revenue for more information.