Indiana State Income Tax in 2025: A Guide

Indiana keeps state income tax simple with its flat tax rate of 3.05% for all individual taxpayers. This straightforward system ensures that everyone pays the same percentage, regardless of income level—making tax filing more predictable and manageable.  

In addition to the state income tax, Indiana counties impose their own local income taxes, which range from 0.5% to 3.0%, depending on the county where you live or work. This means your total income tax rate could be higher based on your county of residence, though it remains straightforward compared to states with complex tiered tax brackets. 

Whether you’re a resident or earn income in Indiana, the flat tax system makes filing taxes more streamlined for the 2024 tax season (the taxes you’ll file in 2025). 

*Note you are still responsible for federal taxes if you meet the IRS income filing threshold. This article addresses state-specific taxes only.

Who has to file Indiana state income tax?

In Indiana, you must file a state income tax return if you meet any of the following criteria: 

• Full-year residents: You’ll need to file a tax return if your gross income (your total income before deductions) exceeds your total exemptions (the amount you can subtract from your gross income). 
• Part-year residents: You’ll have to file a return if you received income while living in Indiana. 
• Nonresidents: If you were a resident of another state, but have Indiana-sourced income, you must file. If you are a resident of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin and only have Indiana income from wages, salaries, tips, or commissions, you also need to file. TurboTax can help you determine the appropriate forms for your situation.

Other income tax considerations in Indiana

Indiana treats different types of income uniquely, offering exemptions and deductions for specific cases. Here’s an overview: 

• Retirement and pension income: Retirement income is taxed as regular income; military retirement pay is fully exempt. Civil service pensions for those 62 or older may qualify for a $16,000 deduction. 
• Investment income: Capital gains, dividends, and interest are taxed as individual income at Indiana’s flat rate of 3.05%. 
• Social Security income: Indiana does not tax Social Security or railroad retirement benefits included in federal taxable income. 
• Military income: Active-duty wages are exempt for Indiana residents; nonresidents pay tax on nonmilitary Indiana-sourced income only.

Indiana state tax deductions and credits

Here’s a quick reference chart outlining key deductions and credits for Indiana taxpayers. 

Tax credit/deduction	Description	Amount
Private School/Homeschool Deduction	Deduction for education expenses per dependent child enrolled in private school or homeschooled.	$1,000 per qualified child.
Renter’s Deduction	Deduct rent paid on Indiana residence subject to state property tax.	Up to $3,000 ($1,500 if Married Filing Separately).
Homeowner’s Residential Property Tax Deduction	Deduct Indiana property taxes paid on principal residence.	Up to $2,500 ($1,250 separately).
Adoption Credit	Credit on your Indiana return if you claimed an adoption credit on your federal return.	The lesser of 20% of the federal credit allowed or $2,500 per child.
College Credit	Credit for donated money or property to Indiana colleges or universities; excludes tuition payments.	Lesser than one-half of the amount contributed, or up to $100 ($200 if Married Filing Jointly).
Foster Care Donations Credit	Credit for donations to approved foster care organizations, capped annually.	50% of the donation made up to $10,000 per year.
Indiana Earned Income Credit (EIC)	Credit available if eligible for the federal earned income credit.	10% of federal EIC; maximum federal credit for 2024 tax year is $7,830.
Public School Educator Expense Credit	Credit for K–12 Indiana public school educators’ classroom supply expenses.	Up to $100 per individual ($200 if Married Filing Jointly).
School Scholarship Credit	Credit for donations to qualified scholarship-granting organizations (SGOs).	50% of donation amount.

Note: Visit the Indiana Department of Revenue website for a full list of income tax credits.

How to file Indiana state income tax

Filing Indiana state income taxes doesn’t have to be stressful. Whether you’re a full-year resident, part-year resident, or nonresident, TurboTax is here to guide you. 

We’ll help you get deductions and credits you’re eligible for in Indiana so you can keep more money in your pocket. From renter deductions to education credits, TurboTax helps simplify the process and maximize your refund. Need extra support? Connect with a local tax expert in Indiana for personalized advice, or let us handle your filing for a smooth, stress-free experience. File confidently with TurboTax today.