Bottom Line
Middle-Class Families: Not Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Not Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
High state income taxes are the driving force behind Indiana's poor tax rating. The Hoosier State's flat 3.23% tax rate itself isn't too bad (and it's going down in 2023), but many counties in Indiana also impose their own income taxes.
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The state's sales and property taxes are both middle-of-the-road when compared to other states. The state's general sales tax rate is high (7%), but municipalities can't tack on their own additional tax. And the median property tax rate in Indiana is comparatively modest, which is nice. Not bad, but not enough to counter the state's high income tax rates.
One additional benefit is that the state is sending two "Automatic Taxpayer Refunds" in 2022. The first rebate is for $125, and the second one is for $200. First-round rebates were sent starting in May 2022, while second-round payments are expected to be delivered by the end of October.
Indiana Income Taxes
Indiana Income Tax Range
Indiana has a flat rate of 3.23% of state adjusted gross income after modifications. Counties also levy income taxes.
For 2023 and 2024, the state rate is reduced to 3.15%. If state revenues reach certain thresholds, the state rate will drop to 3.1% for 2025 and 2026, to either 3% or 3.1% for 2027 and 2028, and to either 2.9%, 3% or 3.1% after 2028.
Indiana Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Indiana Tax Breaks for Other Retirement Income
Taxpayers age 62 and older can deduct up to $16,000 of income from a federal civil-service annuity (minus Social Security and Tier 1 Railroad Retirement benefits).
For the 2021 tax year, up to $6,250 of income from a military retirement plan, plus 75% of the amount received that exceeds $6,250, is exempt. All military retirement income is exempt starting in 2022.
Railroad Retirement benefits are also exempt.
Indiana Sales Tax
7% state levy. No local taxes.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Indiana Real Property Taxes
In Indiana, the median property tax rate is $833 per $100,000 of assessed home value.
Indiana Property Tax Breaks for Retirees
Homeowners 65 and older who earn $30,000 or less ($40,000 or less for a married couple) are eligible for a property tax deduction on property with an assessed value of $200,000 or less ($240,000 or less effective July 1, 2022). The amount of the deduction is the lesser of one-half of the assessed value of the property or $14,000.
The state also allows those 65 or older with an income under $30,000 ($40,000 for couples) to have increases in assessed value limited to 2% a year. This "circuit breaker" benefit is limited to properties with an assessed value below $200,000.
Indiana Motor Fuel Taxes
Gasoline: 49.79¢ per gallon (50.79¢ per gallon effective July 1, 2022).
Diesel: 54¢ per gallon (56¢ per gallon effective July 1, 2022).
Indiana Sin Taxes
Cigarettes: $1 per pack
Snuff: $0.40 per ounce
Other tobacco products: 24% of wholesale price
Alternative nicotine products: Effective July 1, 2022, $0.40 per ounce
Vapor products: Effective July 1, 2022, 15% of gross retail income
Beer: $0.12 per gallon
Wine: $0.47 per gallon
Liquor: $2.68 per gallon
Indiana Estate and Inheritance Taxes
No estate or inheritance tax.
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