Indiana Money and Tax Research Guide

7% at the register, whether you shop in Fort Wayne or French Lick

Indiana is one of the few states where a shopper never has to ask what the local sales tax is. The Department of Revenue sets a single 7% rate on taxable retail sales and no city or county is allowed to layer a general sales tax on top of it. A $100 purchase produces $7.00 of tax in every corner of the state.

The exceptions are narrow and transaction specific. A local food and beverage tax can apply to restaurant meals in a jurisdiction that has adopted one. A county innkeeper tax can apply to hotel stays. Those levies sit beside the 7% rather than inside it. They touch only those categories.

Groceries are mostly out. Qualifying food and food ingredients for home consumption are exempt, but the line is drawn by product, not by store. Candy, soft drinks, heated food and anything prepared for immediate consumption are taxable even in a grocery aisle. A rotisserie chicken carries tax; the raw one next to it does not.

Use tax closes the gap on purchases where Indiana tax was not collected. If a Fort Wayne business buys equipment from a seller who charged only 5% in another state, Indiana expects the 2% difference. Remote sellers must register once Indiana sales pass $100,000 in the current or prior calendar year. Each retail location needs its own Registered Retail Merchant Certificate at $25 apiece.

Myth and fact about Hoosier local taxes

The myth: Indiana has no local taxes. People repeat it because the receipt never shows one.

The fact: all 92 Indiana counties impose a local income tax, called LIT, on the same wages the state taxes. It is collected through payroll withholding and the rate depends entirely on the county. Departmental Notice #1 from the Department of Revenue lists the schedule in force from January 1, 2026:

• Porter County: 0.50%, the lowest in the state
• Hamilton County: 1.10%
• Lake County: 1.50%
• Allen County, home of Fort Wayne: 1.59%
• Marion County, home of Indianapolis: 2.02%
• Randolph County: 3.00%, the highest in the state

In Randolph County the county line on a pay statement is larger than the state line above it. Six counties changed their rates for 2026, with Howard County moving from 1.95% to 2.35%. The Department of Revenue can adjust rates in January and again in October. So the local tax is real. It simply lives on the paycheck instead of the receipt.

The state layer: a flat 2.95% that already has a lower number scheduled

Above the county tax sits Indiana's adjusted gross income tax at a flat 2.95% for 2026, down from 3% in 2025. Under current law it drops again to 2.90% in 2027. There are no brackets and no filing-status tables; every wage earner pays the same percentage of Indiana taxable income.

What changes from person to person is the base. Indiana starts with federal adjusted gross income from Form 1040, applies state add-backs and deductions, then subtracts exemptions: $1,000 for each federal exemption claimed, with extra amounts for certain dependent children, taxpayers 65 or older and taxpayers who are blind. An additional $500 applies to some filers 65 or older below the state income threshold. Because both the state rate and the county rate run on wages after those exemptions, neither line on a check is a clean percentage of gross pay.

Full-year residents file Form IT-40 by April 15. Part-year residents and most nonresidents use Form IT-40PNR. Military retirement pay is fully deductible for an Indiana resident under current guidance.

January 1 locks your county for the whole year

Indiana does not track where you live month by month. Departmental Notice #1 fixes both the county of residence and the county of principal employment on January 1 of the tax year. Three outcomes cover everyone:

1. You lived in an Indiana county on January 1: that county's rate applies, even if you work somewhere else.
2. You lived outside Indiana but your principal work location was in an Indiana county on January 1: the work county's rate applies.
3. Neither was true on January 1: no county tax that year.

An employee who moves from Porter County to Randolph County in March keeps paying 0.50% through December 31. The new county belongs on next year's Form WH-4, the Employee's Withholding Exemption and County Status Certificate, which has fields for both counties as of January 1 and a box to flag a change for the following year.

Two rules soften the edges for cross-border workers. Indiana has wage reciprocity with Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin, so a resident of one of those states whose only Indiana income is wages files Form IT-40RNR rather than paying Indiana state tax on that pay. Separately, a nonresident who works in Indiana for 30 days or fewer in a calendar year can deduct those wages, with Form WH-4AFF supporting withholding relief; cross the 30-day line and withholding reaches back to the earlier days.

What an Allen County assembler actually takes home

Consider an auto parts assembler in Fort Wayne earning $25.00 an hour, working 40 hours a week, paid biweekly and filing single. She lived in Allen County on January 1, so 1.59% is her county rate. The site's 2026 calculator produces this biweekly statement:

Figures come from the Online Paystub Indiana paycheck calculator for 2026. Local taxes, health premiums and retirement contributions are not included.

Look at the two Indiana lines together. The county line is roughly half the state line here, but a colleague on the same wage who lived in Randolph County on January 1 would see a county line larger than the state one. To compare counties, rates or overtime, the Indiana paycheck calculator takes the county as an input.

What the statement must show and when Indiana says the money has to move

Indiana Code 22-2-2-8 requires every covered employer to give each employee, every pay period, a statement listing hours worked, wages paid and deductions made. Hours worked is the first item named. Salaried statements are not excused from it. The records are open to inspection by the Wage and Hour Division of the Indiana Department of Labor.

Timing rules sit alongside it. Under IC 22-2-5-1 wages are due at least semimonthly (biweekly if the employee asks), covering work performed up to a date no more than ten business days before payday. Under IC 22-2-9-2 a discharged employee is paid at the regular payday for the period in which the separation happened; someone who quits waits for the next usual payday. The state minimum wage is $7.25 an hour with time and a half past 40 hours in a workweek and a $2.13 cash wage where a tip credit is claimed.

Labels vary by payroll provider, so an Indiana statement might read IN SIT for the state line and IN CNTY or IN LIT for the county line. The one fixed convention is on the W-2: box 20 carries a C plus the two-digit county code, so C02 means Allen County and C49 means Marion. The abbreviation guide decodes the rest. When payroll has been run from real wages, the Indiana pay stub generator lays out the state line and the county line as separate entries, which is exactly how the W-2 will need them.