Quick Answer
Indiana employers withhold state income tax at a flat 3.05% plus a county income tax based on the employee's county of residence (0.5%–3.38% across all 92 Indiana counties). SUI runs 0.5%–7.4% (new employer 2.5%) on a $9,500 wage base. The minimum wage is $7.25/hr (federal floor). Final paychecks are due on the next regular payday. No state PFL or SDI. County tax withholding is Indiana's unique complexity — it affects every employee.
Table of Contents
Indiana payroll has one feature that stands out from nearly every other state: every one of Indiana's 92 counties has its own local income tax. That means when you hire a new employee, you don't just need to know their state withholding — you need to know which county they live in and what that county's tax rate is. An employee in Marion County (Indianapolis) faces a different combined tax rate than one in Hamilton County or Tippecanoe County.
The state income tax itself is simple — a flat 3.05% that has been trending downward. But the county layer adds a real administrative burden. Your payroll system needs accurate county data for every employee, and that data needs to reflect where they live as of January 1 of the tax year.
Indiana Payroll at a Glance
| Obligation | Rate / Amount | Wage Base / Limit | Who Pays |
|---|---|---|---|
| SUI | 0.5%–7.4% (new: 2.5%) | $9,500 per employee | Employer only |
| IN State Income Tax | Flat 3.05% | All wages | Employee (withheld by employer) |
| County Income Tax | 0.5%–3.38% (varies by county) | All wages | Employee (withheld by employer) |
| State SDI / PFL | None | — | — |
| Minimum Wage | $7.25/hr (federal) | — | — |
State Income Tax: Flat 3.05%
Indiana's flat state income tax rate is 3.05% in 2026. The state reduced it from 3.15% in 2023 and has further reductions scheduled in future years under legislation passed by the Indiana General Assembly. Every Indiana employee pays the same flat rate on their taxable income.
Employees complete Indiana Form WH-4 (Employee's Withholding Exemption and County Status Certificate). The WH-4 captures both the state withholding election and, critically, the employee's county of residence. One form covers both state and county withholding. If an employee doesn't provide a WH-4, withhold at the zero-allowance rate for both state and county (using the default county for employees whose county is unknown).
Indiana income tax withholding is remitted to the Indiana Department of Revenue (IDOR) through INtax, the state's online filing portal. Filing frequency is based on withholding volume: semi-weekly, monthly, or quarterly. Year-end W-2s and reconciliation are due January 31.
County Income Taxes: 92 Counties
This is the distinctive feature of Indiana payroll. Every one of Indiana's 92 counties has a county-adjusted gross income tax (CAGIT) or county option income tax (COIT) — collectively referred to as county income taxes. Rates vary from about 0.5% in lower-rate counties to 3.38% at the high end.
Which County Rate to Use
Indiana county tax is withheld based on the employee's county of residence as of January 1 of the tax year. Not their work location. Not their current address mid-year. Where they lived on January 1.
If an employee moves from Marion County to Hendricks County in April, they remain subject to Marion County's rate for the entire tax year. The new rate takes effect for them the following January 1.
Rates for Major Indiana Counties
| County | County Seat / Metro | 2026 County Rate | Combined with State (3.05%) |
|---|---|---|---|
| Marion | Indianapolis | 2.02% | 5.07% |
| Hamilton | Noblesville | 1.10% | 4.15% |
| Allen | Fort Wayne | 1.48% | 4.53% |
| Lake | Gary / Crown Point | 1.50% | 4.55% |
| St. Joseph | South Bend | 1.75% | 4.80% |
| Tippecanoe | Lafayette | 1.28% | 4.33% |
| Elkhart | Elkhart | 2.00% | 5.05% |
The full list of all 92 county rates is published annually by IDOR. Always download the current year's rate table — county rates change when county councils vote to adjust them.
Employees Living Outside Indiana
If an employee works in Indiana but lives in another state, no Indiana county tax applies. They may owe income tax in their home state. Indiana has reciprocity agreements with several neighboring states (Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin) allowing residents of those states to pay income tax only to their home state. If an employee from one of those states works in Indiana, they complete a reciprocity exemption form rather than a WH-4.
Reporting County Tax
County income tax is withheld, reported, and remitted using the same process as state income tax — through INtax, on the same return (WH-1). You report each employee's county and wages, and IDOR distributes the county portion of the withholding to the appropriate county. You don't file separate county returns.
State Unemployment Insurance (SUI)
Indiana SUI is administered by the Indiana Department of Workforce Development (DWD). The $9,500 wage base is close to the national average, making Indiana SUI costs moderate.
SUI Rates for 2026
- New employer rate: 2.5%
- Experienced employer range: 0.5% to 7.4%
- Taxable wage base: $9,500 per employee per year
- Maximum annual cost per employee (new employer at 2.5%): $237.50
- Maximum possible cost per employee (at 7.4%): $703.00
SUI returns are filed quarterly through Indiana DWD's UPLINK system. Deadlines follow the standard schedule: April 30, July 31, October 31, January 31.
Minimum Wage
Indiana's minimum wage is the federal floor of $7.25 per hour. Indiana has no state minimum wage law above the federal minimum, and local governments cannot set higher rates. The $7.25 rate applies statewide regardless of county.
Indiana allows the federal tip credit. Tipped employees can receive as little as $2.13 per hour in direct wages, with tips covering the rest to $7.25. If tips don't reach $7.25, the employer pays the shortfall.
Overtime
Indiana follows FLSA: non-exempt employees earn 1.5x their regular rate for hours over 40 in a workweek. Indiana has no daily overtime requirement.
Final Paycheck Rules
Indiana requires final wages to be paid on the next regular payday following separation. This applies to both voluntary resignations and involuntary terminations. No requirement to pay on the date of discharge.
Indiana's Wage Payment statute (IC 22-2-9) gives employers a clear deadline. Violating it gives the employee the right to file a wage claim with the Indiana Department of Labor, which can result in treble damages — three times the amount of unpaid wages — plus attorney fees in court.
Accrued Vacation
Indiana treats accrued vacation as wages if your written policy promises payout at termination. Indiana courts have consistently held that employer policies create enforceable wage obligations. A "use it or lose it" policy must be clearly communicated, and even then, some Indiana courts scrutinize whether employees had a genuine opportunity to use the leave before forfeiture.
Federal Payroll Taxes
Indiana employers owe federal payroll taxes in addition to state and county obligations:
- Social Security: 6.2% employer + 6.2% employee on wages up to $176,100
- Medicare: 1.45% employer + 1.45% employee on all wages; 0.9% Additional Medicare Tax on employee wages over $200,000
- FUTA: 6.0% on first $7,000, effective 0.6% with state UI credit
- Federal income tax withholding: Per each employee's W-4
Registering as a New Employer in Indiana
Two registrations are required before running Indiana payroll:
- Indiana DWD registration: Register with the Indiana Department of Workforce Development for SUI through the UPLINK Employer Self Service portal at uplink.in.gov.
- Indiana IDOR registration: Register with the Indiana Department of Revenue for withholding through INtax at intax.in.gov. You'll use INtax for all state and county withholding remittances.
When registering with IDOR, have your complete list of employee home counties ready. The system will prompt you to configure county withholding as part of your account setup.
Filing Deadlines and Penalties
Indiana Withholding Penalties
- Late filing: 10% of unpaid tax, minimum $5
- Late payment: 10% of unpaid balances plus interest at 3% per year above the prime rate
- Failure to withhold county tax: Employer is liable for the amounts that should have been withheld, including county portions
County Tax Is Where Errors Happen
The most common Indiana payroll error is using the wrong county rate for an employee. This happens when: (1) an employee moves and updates their address but the county rate isn't recalculated; or (2) a new employee provides their city but not their county. Always confirm county on the WH-4 and update your payroll system when an employee's January 1 county changes for the following year. Payroll platforms like Gusto pull current Indiana county rates automatically based on employee addresses.
Frequently Asked Questions
Does Indiana have county income taxes?
Yes. All 92 Indiana counties impose a local income tax ranging from 0.5% to 3.38%. It's withheld based on the employee's county of residence as of January 1. Combined with the 3.05% state rate, total Indiana income tax withholding typically ranges from 3.55% to 6.43% depending on the employee's county.
What is Indiana's state income tax rate for 2026?
Indiana's flat state rate is 3.05%, reduced from 3.15% in 2023 with further reductions scheduled. All Indiana taxable income is taxed at 3.05%.
What is the Indiana SUI rate for new employers in 2026?
New employers pay 2.5% on the first $9,500 of each employee's annual wages. Experienced employer rates range from 0.5% to 7.4%.
How do I determine which county tax rate to withhold?
Use the employee's county of residence as of January 1 of the tax year. Employees declare their county on Form WH-4. If they move during the year, the January 1 county applies for the full year; the new county takes effect the following January 1.
When is a final paycheck due in Indiana?
The next regular payday after separation. Late payment can result in treble damages under Indiana's Wage Payment statute.
What is Indiana's minimum wage in 2026?
Indiana's minimum wage is the federal floor of $7.25 per hour. No state law or local ordinance sets a higher rate in Indiana.
Simplify Indiana Payroll
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Legal & Tax Disclaimer
This article is for general informational purposes only and does not constitute legal, tax, or professional advice. Employment laws, tax regulations, and compliance requirements change frequently. Always consult a qualified attorney, CPA, or HR professional familiar with Indiana law before making payroll or compliance decisions for your business.