Indiana Tax Guide: What You’ll Pay in 2024
Indiana is moderately tax friendly toward retirees. The Hoosier State does not tax Social Security benefits, estates or inheritances, and there are tax breaks on property for older residents. However, Indiana taxes income from pensions and retirement savings accounts.
Indiana’s sales and flat income tax are average compared with other states, and there is a cap on the amount residents may be taxed on their property.
The big picture:
Income tax: 3.15 percent (flat)
For the 2023 tax year, Indiana had a flat income tax rate of 3.15 percent.
In 2024, the state lowered its income tax rate from 3.15 percent to 3.05 percent, which will impact taxes filed in 2025. The state plans to gradually reduce the rate to 2.9 percent by 2027. Some jurisdictions also collect a local income tax.
Property tax: .84 percent of a home’s assessed value (average)
Real estate taxes vary by county and municipality across Indiana, with an average tax rate of .84 percent of a home’s assessed value in 2021, according to the Tax Foundation. Property taxes are capped at 1 to 3 percent of property value, depending on the type of property. The cap for owner-occupied homes is 1 percent.
Sales tax: 7 percent
A sales tax rate of 7 percent is levied on the sale of goods and tangible personal property such as cars, jewelry and furniture. Most services are not subject to sales tax, and there are no local sales taxes.
How is income taxed in Indiana?
Indiana had a flat 3.15 percent individual income tax rate for tax year 2023, which covers taxes being filed in 2024. Some jurisdictions collect local income taxes.
The state lowered the income tax rate to 3.05 percent in 2024, which impacts taxes filed in 2025, and plans to gradually reduce it to 2.9 percent over the next three years. The rate will be lowered to 3 percent in 2025; 2.95 percent in 2026; and 2.9 percent in 2027.
Watch the video below to learn how to identify your 2023 federal income tax brackets.
Are pensions or retirement income taxed in Indiana?
Income from pensions and retirement savings accounts is taxed as regular income, except for military retirement pay, which is exempt.
AARP’s Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.
What about investment income?
Indiana taxes all capital gains from investments as ordinary income, and the same flat income tax rate applies.
Does Indiana tax Social Security benefits?
No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you file jointly and as a couple make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a couple. AARP’s Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.
How is property taxed in Indiana?
Property tax in Indiana is a local tax based on the value of your home, which is assessed by the county. The average rate is .84 percent of the assessed value of your home, but taxes vary by county and municipality.
Property taxes on owner-occupied homes are capped at 1 percent of the property’s value. The cap is 2 percent for farmland and other residential properties such as rentals and 3 percent for all other property.
Indiana does not tax personal property, such as cars, boats and airplanes. But those vehicles are subject to a state excise tax when they’re registered.
For more information about property taxes, including how to appeal your assessment, visit the Indiana Department of Local Government Finance’s website.
What about sales and other taxes?
- Sales tax: 7 percent A sales tax rate of 7 percent is levied on the sale of goods and tangible personal property such as cars, jewelry and furniture. Most services are not subject to sales tax, and there are no local sales taxes.
- Groceries and prescription drugs are exempt from sales tax. However, prepared food, candy, soft drinks and dietary supplements are taxable.
- Gas tax: Indiana charges two taxes on gasoline: an excise tax of 34 cents a gallon and a 7 percent per gallon gasoline use tax, which takes the place of state sales tax. The use tax per gallon is calculated monthly based on the statewide average retail price per gallon of gasoline. An excise tax of 57 cents per gallon is charged for special fuel or alternative fuel such as diesel. These taxes are paid by the wholesaler but included in the price at the pump.
- Vehicle tax: Vehicles sold in Indiana are subject to the 7 percent sales tax. You’ll also pay an annual vehicle excise tax when you register your vehicle or renew your registration. The amount of the tax varies based on the type of vehicle, its initial value and its age. You may be charged a local tax on your vehicle, depending on where you live. Visit the Indiana Bureau of Motor Vehicles website for more information.
- Alcohol taxes: The state charges an excise tax of 12 cents a gallon on beer and 47 cents a gallon on most wine. Liquor with less than 15 percent alcohol is taxed at 47 cents a gallon. Liquor with 15 percent alcohol or more, and wine with more than 21 percent alcohol, are taxed at $2.68 a gallon. Excise taxes are paid by the vendor, but some or all may be included in the retail price. Alcoholic beverages are also subject to state sales tax.
- Lottery: Indiana lottery winnings are subject to state and federal tax, even if you don’t live in Indiana. Indiana automatically withholds state income taxes of 3.15 percent from lottery prizes of more than $1,200 and federal income taxes of 24 percent from lottery prizes of more than $5,000.
Will I or my heirs have to pay inheritance or estate tax?
No. Indiana does not have an estate or inheritance tax, so heirs do not pay taxes on money or property they inherit.
Are there any tax breaks for older Indiana residents?
Yes, Indiana offers several property and income tax breaks for older residents.
Property tax
If you’re 65 or older, you may be eligible for a reduction of up to $14,000 in the assessed value of your home. To qualify, you must have a combined adjusted gross income of $40,000 or less for the previous year (or $30,000 if you’re a single filer) and your home must have an assessed value of $240,000 or less. Surviving spouses who have not remarried may qualify if they turned 60 on or before Dec. 31 of the previous year and their spouse was 65 or older.
Residents 65 and older may also be eligible for Indiana’s circuit breaker program, which limits yearly property tax increases on owner-occupied property to 2 percent. To qualify, you must have an adjusted gross income of $30,000 or less for a single person, or $40,000 or less for a household, and your property must have an assessed value of no more than $200,000.
The Indiana Department of Local Government Finance has more information.
Income tax
Indiana offers a $1,000 income tax exemption to taxpayers and their spouses who are 65 and older. An additional $500 exemption is offered to taxpayers with an adjusted gross income of less than $40,000.
If you or your spouse were at least 65 by the end of the taxable year and have an adjusted gross income of less than $10,000, you may be eligible for the Unified Tax Credit for the Elderly. Find more details about eligibility on the Indiana Department of Revenue website.
Military veterans and veterans with a disability may qualify for additional property and income tax deductions. The Indiana Department of Local Government Finance and the Indiana Department of Revenue have more information.
Are military benefits taxed in Indiana?
Indiana does not tax military retirement pay.
Military income for those on active duty or in the reserves is taxed after a $5,000 deduction for Indiana residents. Military pay earned in a combat zone is exempt.
If you are a nonresident stationed in Indiana, you must pay state taxes on any nonmilitary income you earn while in the state. Nonresident military spouses’ wages are exempt. Indiana residents who are members of the Indiana National Guard or the U.S. Armed Forces Reserves may deduct all their military pay from their adjusted gross income if they are called to federal active duty.
For more information about taxes on military benefits, visit the U.S. Army’s MyArmyBenefits website.
What is the deadline for filing Indiana taxes in 2024?
The deadline to file a state tax return in Indiana is April 15, which is also the deadline for federal tax returns. For help estimating your annual income taxes, use AARP’s Tax Calculator.Details about filing for an extension until Nov. 15 are available at the Indiana Department of Revenue website. You must file your extension request on or before the April 15 deadline. Even with an extension, any taxes owed must be paid by the original deadline.
Register with the Indiana Taxpayer Information Management Engine to make payments electronically or check the status of your refund.
Maura Kelly Lannan is a writer, editor and producer for AARP who covers federal and state policy. She has worked as a reporter for the Associated Press, the Chicago Tribune and the Waterbury, Connecticut, Republican-American. She also has written for Bloomberg Government, The Boston Globe and other publications.
