January 1 — the key date
Why does Indiana use January 1 instead of December 31?
Most states that determine local tax by residence use December 31 as the reference date. Indiana is the exception: your county income tax rate for the entire year is set by where you live on January 1 of that tax year. This means if you move from a high-rate county to a low-rate county on January 2, you are locked into the high rate for the entire year.
Conversely, if you move from a low-rate county to a high-rate county on January 2, you pay the low rate all year. This creates a planning dynamic: moving before January 1 locks in the new rate; moving after January 1 delays the rate change until the following year.
The January 1 rule also means your employer must determine your county of residence at the start of each year for withholding purposes. If you move mid-year, the withholding rate does not change until the following January.
How do the rates vary across Indiana counties?
With 92 counties each setting their own rate, the variation is enormous. Some of the lower rates are around 0.5%, while the highest county rates exceed 3%. The rates are set by county councils and can change from year to year. The Indiana Department of Revenue publishes a complete county tax rate table each year showing the rate for every county.
The county tax applies to your Indiana adjusted gross income, which is slightly different from federal AGI. It covers wages, self-employment income, investment income and most other income sources — broader than Ohio's earned-income-only municipal tax.
How does filing work?
The county income tax is calculated on your Indiana state return (Form IT-40 for residents, IT-40PNR for part-year residents and nonresidents). You identify your county of residence on January 1 on the form, and the return calculates your county tax automatically using that county's rate. There is no separate county filing.
Employers withhold county tax from paychecks based on the employee's county of residence. If you move counties mid-year, you should notify your employer, but the withholding rate will not actually change until the following January 1.
What about nonresidents working in Indiana?
Indiana charges nonresidents a county tax based on the county where they work, not where they live. If you live in Ohio, Kentucky or Illinois and commute to an Indiana job, you owe Indiana county income tax at the rate for the county where your workplace is located. This is reported on Form IT-40PNR.
Your home state may give you a credit for Indiana taxes paid. The interaction depends on your home state's credit rules and any reciprocal agreements in effect.
How does Indiana county tax compare to other local income taxes?
Indiana's system is closest to Maryland's in structure (county-based, collected via state return), but with two important differences: Indiana uses January 1 instead of December 31, and Indiana applies the tax to a broader income base. Unlike Ohio or Pennsylvania where only earned income is taxed locally, Indiana's county tax covers investment income and most other AGI components. A retiree in a high-rate Indiana county could owe substantial county tax on pension and investment income — something that would not happen in Ohio's earned-income-only system.
What if your employer is withholding the wrong county rate?
Employer errors on county withholding are common in Indiana, especially when a company uses the county where its office is located rather than the employee's county of residence. If you notice the wrong county code or rate on your pay stub, file an updated Form WH-4 with your employer listing your correct county of residence as of January 1. Your employer should adjust withholding going forward. Any discrepancy between what was withheld during the year and what you actually owe is reconciled on your Indiana state return at filing time. You will either receive a county tax refund or owe additional tax, depending on whether the incorrect county's rate was higher or lower than your actual county's rate.
What about reciprocal agreements with neighboring states?
Indiana has reciprocal income tax agreements with several bordering states, including Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. Under these agreements, residents of the reciprocal state who work in Indiana can claim exemption from Indiana state tax (not county tax for nonresidents). However, if you live in Indiana and work in a reciprocal state, you file and pay Indiana state and county taxes on all income. The reciprocal agreement means the other state does not also tax your wages. Nonresidents working in Indiana still owe Indiana county tax at the rate of the county where they work, which is separate from the reciprocal agreement's effect on state tax.
What does the combined burden look like for an Indiana worker?
Worked example: $60,000 salary, single filer, Marion County (Indianapolis) resident
| Tax layer | Approximate amount |
|---|---|
| Federal income tax | ~$5,800 |
| FICA (employee share) | ~$4,590 |
| Indiana state income tax (2.95%, 2026) | ~$1,830 |
| County income tax (Marion ~2.02%) | ~$1,212 |
| Estimated take-home | ~$46,568 |
Marion County rate is illustrative. County rates change annually. Use our Indianapolis take-home calculator for a personalized estimate.
Indiana's flat state rate has stepped down under HB 1002 (2022) — 3.23% (2022), 3.15% (2023), 3.05% (2024), 3.0% (2025), 2.95% (2026). Confirm the current figure on the Indiana DOR site before you rely on it; combined with a high county rate the total can approach or exceed 6%. Workers relocating within Indiana should compare county rates, as the difference between a 1% and a 3% county on a $60,000 salary is $1,200 per year in additional tax. The January 1 rule means you can lock in the lower rate by establishing residence before the new year.
Where do I find my county's current rate?
The Indiana Department of Revenue publishes a complete county rate table each year, listing the rate for all 92 counties. The table is available on the DOR website and is updated when county councils change their rates. Your employer uses this table to determine the correct withholding rate based on your county of residence on January 1.
Questions
Indiana county income tax FAQ
How many Indiana counties have a local income tax?
All 92 Indiana counties levy a county income tax. There is no Indiana county without one. The rates range from about 0.5% to over 3% and are set individually by each county council. The rate for the entire year is determined by your county of residence on January 1.
Why does Indiana use January 1 instead of December 31?
Indiana law sets the county rate based on your residence on January 1 of the tax year. This is unique among states. If you move between counties after January 1, your rate does not change until the following year. This gives Indiana a built-in planning dynamic that other states do not have.
Does Indiana county tax apply to investment income?
Yes. Unlike Ohio or Pennsylvania municipal taxes which only cover earned income, Indiana's county income tax applies to your Indiana adjusted gross income, which includes wages, investment income, retirement distributions and most other income. This broader base means retirees and investors also owe county tax.
Do I file a separate county return?
No. The county tax is calculated automatically on your Indiana state return (Form IT-40). You identify your county of residence on January 1, and the form applies the correct rate. There is no separate county-level filing requirement.
What if I move to a different Indiana county mid-year?
Your county tax rate for the entire year is locked in by your residence on January 1. Moving mid-year does not change your rate until the following January 1. Notify your employer of the move, but the withholding rate stays the same until the new year.
What if my employer is withholding the wrong Indiana county tax rate?
If your employer is using the wrong county rate (for example, using the county where the office is located instead of your county of residence on January 1), file an updated WH-4 form with your employer listing your correct county. Any over-withholding or under-withholding is reconciled when you file your Indiana state return. You will either receive a refund or owe additional county tax depending on the rate difference.
Can I look up any Indiana county's current tax rate online?
Yes. The Indiana Department of Revenue publishes the complete county income tax rate table on its website at in.gov/dor. The table is updated each year and lists the rate for all 92 counties. You can also find the rates in the instructions for Form IT-40 and Schedule CT-40. Since county councils can change rates annually, always verify the table for the current tax year rather than relying on prior-year information.
- Sources: Indiana Dept. of Revenue · Indiana Code 6-3.6 · IN county rate tables.
- Last updated July 31, 2026
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