Navigate today's economy with helpful tips and receive a chance to win $26K!

Content starts here

Indiana State Taxes: What You’ll Owe in the 2026 Tax Season

Valerie Bauman,

Updated March 23, 2026

AARP

Published February 29, 2024

/ Updated March 23, 2026

Getty Images

Indiana is among the 14 states that have a flat tax. It also has no inheritance tax and an efficient property tax system that is designed to prevent unconstrained increases, according to the Tax Foundation. Those are among the factors that have contributed to the state’s No. 10 ranking on the Tax Foundation’s 2026 State Tax Competitiveness Index.

The big picture:

Income tax: The state has a 3 percent flat income tax, assessed on adjusted gross income after any deductions or exemptions. Indiana also allows local governments to impose their own income taxes, which range from 0.5 to 3 percent.
Property tax: An effective rate of 0.76 percent on assessed value, according to the latest Tax Foundation data
Sales tax: 7 percent, with no local sales taxes

How is income taxed?

Indiana has a 3 percent flat income tax. However, local governments can impose their own income taxes, which range from 0.5 to 3 percent, according to the Tax Foundation.

What about investment income?

Investment income in Indiana is subject to the 3 percent flat individual income tax rate. Some exceptions exist for interest income from governmental obligations like treasury bonds. Find more details here.

Are Social Security benefits taxed?

Indiana does not tax Social Security benefits.

How is property taxed?

Indiana has a 0.76 percent average property tax rate, according to the latest data from the Tax Foundation. Rates vary by county, from a low of 0.45 percent in Switzerland, Brown and Putnam counties to 0.93 percent in Lake County. The lowest median property tax paid was $627 in Clay County, while the high was $3,549 in Hamilton County.

What about sales and other taxes?

Sales tax: 7 percent, with no local sales taxes. Exemptions include most groceries, newspapers, prescription medication, lottery tickets, postage stamps and other items.
Gas and diesel: The state has a gasoline use tax on gasoline and gasohol fuels. It is equivalent to the 7 percent sales tax that would be collected by a retail merchant and is collected instead of sales tax on the sale of gasoline.
Vehicle tax: Purchase costs of vehicles include a 7 percent excise tax. The state also charges an annual excise tax that is assessed when you register the vehicle and varies based on the price and age of the car. More details can be found here.
Alcohol: Beer is taxed at 11.5 cents per gallon. Liquor and wine that are 21 percent alcohol or more are taxed at $2.68 per gallon, while liquor and wine below that alcohol level are taxed at 47 cents per gallon.
Lottery: Indiana’s lottery withholds 3.23 percent in taxes on prizes that exceed $1,200, as well as 24 percent for federal taxes on prizes of $5,000 or more.

Will my heirs or estate have to pay inheritance or estate taxes?

Indiana has no inheritance or estate tax.

Are there any tax breaks for older residents?

Homeowner residential property tax deduction: Indiana homeowners can deduct up to $2,500 of the property tax they pay on their principal residence.

Unified tax credit for the elderly: Residents 65 and older can get a credit of $40 to $140, depending on marital status and income. They must have a federal adjusted gross income of $10,000 or less and must have been a resident of the state for six months or more. Additionally, they must not have spent 180 days or more in prison during the year.

Additional exemption for the elderly: Residents age 65 and older whose federal adjusted gross income is less than $40,000 are eligible for an additional $500 exemption.

Is military retirement income taxed?

No. Indiana offers a tax deduction for military retirement and/or survivor benefits, eliminating any liability for that pay.

What is the deadline for filing taxes in 2026?

The deadline for 2025 taxes to be filed is April 15, 2026.

More AARP Financial Resources

AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
AARP’s Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
AARP Tax Tools Explore resources to help you calculate and prepare taxes.

Valerie Bauman is a journalist and author with two decades of experience working for publications, including Newsweek, Bloomberg and The Associated Press. Throughout her career, she’s covered politics and the law, including pharmaceutical litigation, mass torts and election law.