An Overview of Indiana State Taxes
Understanding when and if you have to file taxes is important, no matter where you live. Indiana has several different tax regulations to consider if you’re a resident in the state. If you don’t pay the right types of taxes in the correct amounts or you pay late, you can face serious consequences, such as penalty fees or interest charges. Review this guide to find out more about tax laws that may apply to you and seek professional assistance to ensure you’re paying the proper taxes.
Table of Contents
Indiana Income Tax
When you earn income, you must file a federal income tax return. If you earned your income in Indiana, you’re also responsible for filing a state income tax return. These taxes are calculated using the adjusted gross income you earned for the year.
Indiana has a flat income tax rate of 3.23%. This means that no matter your filing status or the amount of income you earned, you’ll pay this rate. It differs from many states that have adopted a graduated tax rate, or a rate that gets higher as the income you earned increases.
Your state income taxes are due on April 15 every year. You can use the Indiana Department of Revenue (DOR) online system to file your return and pay your taxes. If you prefer, you can print your tax forms, complete them, and mail them to the DOR instead.
County Tax Rates
Many counties in Indiana also collect their own individual income tax. This is in addition to the flat tax rate of 3.23%. County tax rates vary but usually range from .005% to .02864%. For example, Lake County residents must pay an additional .015% in county taxes while Allen County imposes an additional .013825% county tax on income.
Indiana Sales Taxes
When you make a purchase of taxable goods or services in Indiana, you’re charged sales tax on the transaction. The statewide sales tax in Indiana recently increased to 7% due to a cut in property tax rates. While this seems like a high sales tax rate, keep in mind that municipalities cannot generally add local sales tax to this rate as they can in most other states.
Some items, such as agricultural equipment, are exempt from sales tax. You can access sales tax forms for exemptions, refunds, or applications on the DOR website.
Indiana Property Taxes
In Indiana, property taxes are overseen by the Indiana Department of Local Government Finance and are administered to property owners locally through the county. To determine the property taxes you must pay, county assessors first assess the value of your property. Once the value is determined, the local tax rate is applied to calculate the property taxes you owe. If you disagree with the assessment of your property, you can file an appeal within 45 days of receiving your tax bill.
You receive a property tax bill in the mail from your county treasurer in the spring, which provides you with the due dates for your taxes. Property taxes are due twice a year and a 5% penalty is applied to your taxes if you’re 30 days late sending your payment.
Property Tax Deductions
If you meet specific eligibility guidelines, you qualify for a property tax deduction. Indiana offers several property tax deductions that reduce your property tax bill, including the following:
- Homestead deduction: If you live on your property full-time and it’s your principal residence, you may qualify for this deduction.
- Rehabilitated property deduction: If you’ve rehabilitated a home and increased its value, you may be eligible for a deduction in your property taxes.
- Veteran deduction: Disabled veterans or the surviving spouses of certain types of veterans may qualify for this property tax deduction.
To apply for a property tax deduction, you must complete the corresponding property tax deduction form and submit it to your county treasurer.
Indiana Estate Taxes
Indiana does not impose an estate tax or an inheritance tax on the transfer of property ownership after death. The inheritance tax was repealed in 2013 and residents who passed away after December 31, 2012, are not responsible for paying inheritance taxes.
You may be required to file a federal estate tax return and pay taxes to the Internal Revenue Service (IRS) for the estate’s transfer of ownership. This only applies if the total assets are worth $11,580,000 or more in 2020.
Tips for Filing Taxes in Indiana
Your income tax return is due on April 15 and your property taxes are due twice a year, as noted by your county treasurer. You can use the INfreefile online system to conveniently electronically file your taxes for free and pay any taxes you owe to the state.
You’re able to review information on any other additional taxes the state imposes on the Indiana DOR website. It’s important to prepare to file your taxes before you begin the process. Gather any documents you need, review potential exemptions and deductions you qualify for, and set up an online account through the electronic filing system. By understanding the Indiana tax system, how your taxes are calculated, and when they’re due, you’ll ensure you pay the right amount on time and avoid penalties.
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This post was updated February 5, 2020. It was originally published February 5, 2020.