2027 Indiana state tax guide
2027 Indiana Tax Changes: the confirmed state rate and county layer
Indiana has confirmed a 2.90% individual AGI tax for 2027. Your final bill still depends on the separate county layer, which can change in January and October. This guide maps the resident status path, reciprocal work choices, withholding checks, form selection, and retirement questions you’ll use once 2027 instructions post.
Need to compare years? Review the 2026 Indiana Tax Changes Guide for the prior-year rules and planning context.
Use current state releases to confirm final 2027 forms, tables, and instructions before filing or making a tax decision.
Connected 2027 guide library
Start with the 2027 tax question that fits your next decision.
Use Indiana’s rates page, county rate charts, and the 2027 IT-40 and IT-40PNR instruction booklets for final guidance. Check again after any January or October county updates before you file or adjust estimates.
Core answer
Indiana has confirmed its 2027 individual adjusted gross income tax rate at 2.90%. That statewide rate is only one piece of what you’ll owe. A separate county income-tax layer applies for many filers, and county rates can be adjusted in January and October. Do not assume last year’s county percentage; use the Department of Revenue’s current-year county charts and the 2027 instruction booklets once released. Your resident or nonresident path, the specific residence-date rule in the instructions, and any reciprocal-state arrangement can change where income is taxed and which form to file. Full-year residents generally use IT-40; part-year and nonresidents typically use IT-40PNR. Check your 2027 withholding and estimated payments against the confirmed 2.90% plus the appropriate county rate, and review the 2027 instructions for retirement and Social Security treatment before finalizing.
The confirmed 2027 Indiana state rate and the separate county-tax question
Indiana’s Department of Revenue has confirmed the 2027 individual adjusted gross income tax rate at 2.90%. That figure is the statewide piece that applies before any county layer. It follows the 2.95% rate used for 2026. Many Hoosiers also face a county income tax, and those county percentages are not uniform. The Department notes county rates may be adjusted in January and October. Because of that update cadence, you should not carry forward last year’s county figure. Use the Department’s current-year county rate charts and the 2027 instruction booklets to find the right percentage when you prepare or update your withholding and estimates.
County income tax in Indiana is separate from the state’s confirmed 2.90% and is calculated under rules explained in each year’s booklets. Which county applies depends on residence and, in some cases, where you work, as defined in the instructions. Employers often withhold county tax during the year, but your return is where the final county liability is determined. Midyear rate adjustments can affect paychecks, while your filed return relies on the published guidance for the tax year. Always align your planning with the most recent Department charts and form instructions, not an old paycheck stub or a prior-year worksheet.
Because county taxes are set locally and coordinated through the Department, they can differ significantly among counties and may be revised during the year. Two households with the same income can owe different totals if they are linked to different counties under the instruction rules. This is why planning with only the state rate risks a shortfall. Treat the county layer as a distinct, mandatory step in your process: identify the applicable county, find its current-year rate in the Department chart, and then apply that on top of the 2.90% state rate when modeling cash flow or estimated payments for 2027.
If you moved, started a new job, or changed work locations, the county layer deserves extra attention. Your employer’s withholding setup may lag behind your actual situation, and county rates can change in January or October. The Department’s instruction booklets explain which date controls your county assignment for the year and how nonresidents with Indiana wages are handled. Keep clear records of where you lived and worked, and compare your paystub’s county withholding to the current chart. If there is a mismatch, adjust withholding or estimates now so the 2027 return does not surprise you later.
Bottom line: Indiana’s state piece for 2027 is settled at 2.90%, but the county layer is separate, variable, and time-sensitive. Find your correct county assignment using the year’s instruction definitions, locate that county’s rate in the Department’s chart, and incorporate both into your withholding and estimates. Because county percentages may be updated in January and October, double-check the latest chart before making large estimated payments or finalizing a projection, and revisit it again when you complete your 2027 return.
Choose the right Indiana taxpayer path: resident, part-year resident, nonresident, or reciprocal worker
Your first Indiana decision is your status for the year: full-year resident, part-year resident, or nonresident. That status shapes which form you file, how income is sourced, and how any county layer applies. The Department’s booklets define residency and provide examples, so use those rather than assumptions about days or mailing addresses. If your year included a move into or out of Indiana, keep precise dates, leases, and utility records. These details will feed the part-year sections if you do not meet the full-year standard, and they will also help you confirm how the county layer applies under the year’s definitions.
Form choice follows status. Full-year residents generally file Form IT-40. Part-year residents and nonresidents generally use Form IT-40PNR, which allocates income to Indiana per the instructions. Confirm this in the 2027 form instructions before filing, particularly if you had unusual income (such as pass-through, installment sales, or remote work wages). If you are married and your spouse’s residency differs from yours during the year, read the instructions covering filing status, allocations, and any limitations on credits or deductions for mixed-residency households. Indiana’s forms will walk you through these questions step by step once the 2027 editions are posted.
Reciprocal-state employment is a special path. Indiana maintains reciprocity arrangements with certain neighboring states. If you live in one of those states and work in Indiana, your wages are generally taxed by your state of residence, not by Indiana. The Department’s current instructions identify the reciprocal states and explain how to claim an exemption from Indiana wage withholding using the appropriate certificate. If you do not live in a reciprocal state, the nonresident rules in the IT-40PNR instructions govern your Indiana wage reporting. Always confirm reciprocity status for the year; do not rely on a prior HR memo.
Special situations deserve extra care. College students who keep a permanent home elsewhere, military families, and spouses of active-duty service members often face nuanced residency questions. Remote and hybrid workers may have income sourced to more than one state depending on where work is performed. Indiana’s 2027 instructions will address these scenarios, including what records to keep and how to allocate income on IT-40PNR when needed. Before year-end, make a short checklist: your domicile intention, your actual living arrangement, your work locations, and any written employer agreements about telework. Those details will drive the correct path.
Life changes during 2027—marriage, divorce, a home purchase or sale, or a change in job location—can shift your path and the county layer that accompanies it. Track your key dates and save documents that verify them. If you expect a move, review the Department’s residency and allocation guidance before you relocate so you understand how the remainder of the year will be reported. With the confirmed 2.90% state rate, the biggest remaining variables are your status, your county assignment under the year’s rules, and whether a reciprocal arrangement changes where your wages are taxed.
How county income tax, residence date, and withholding work together
Indiana’s county income tax hinges on a specific “as of” date and definitions that the Department sets out in the instructions. That date determines which county’s rate applies for the year for residents, and nonresidents may have a county tax based on an Indiana work location, as explained in the booklets. Because these rules can be technical and are updated as needed, do not guess based on your end-of-year address. Use the 2027 instructions to identify the controlling date and assignment, then match that county to the current-year county rate chart when you prepare returns or estimates.
Employers generally use the information you provide on Indiana’s employee withholding paperwork to calculate both state and applicable county withholding each pay period. If you move or change primary work locations, update your employer promptly so paychecks better reflect your likely year-end outcome. Even with updated payroll, your final county liability is set on the return using the year’s instruction rules for county assignment, not simply where your last check was issued. If payroll withheld for the wrong county or at a rate that changed during the year, your return will reconcile the difference.
The Department notes that county income-tax rates may be adjusted in January and October. That matters for both payroll and estimated payments. Your employer’s software might update midyear rates for withholding, which can change your take-home pay. But the rate you ultimately use on the 2027 return will come from the Department’s published resources for that tax year. Before making or changing estimated payments, consult the latest county rate chart so your combined state-and-county estimate reflects current information, especially if you live near a county line or recently moved.
Remote and hybrid work add a county layer wrinkle. If you live in Indiana but work some days elsewhere, or you live outside the state and perform work in Indiana, the county rules in the 2027 instructions will tell you whether residence, place of principal employment, or another factor governs your county assignment. Keep documentation showing where work was actually performed, such as schedules, employer letters, or timekeeping reports. That evidence is valuable if county withholding on your W-2 differs from the county the instructions say applies to you for the year.
When projecting cash flow, you can create a quick combined rate by adding the confirmed 2.90% state rate to the applicable county percentage from the Department’s current chart. Use that combined figure for a conservative estimate, but revisit it before any large quarterly payment because counties may change rates in January or October. If your county announces a change and payroll updates in the middle of the year, compare your year-to-date withholding with your projection and adjust the remaining pay periods or estimates so you are aligned with the latest chart.
Retirement, Social Security, credits, and other Indiana return considerations
Indiana starts from federal adjusted gross income and then applies its own additions, subtractions, and credits as detailed each year in the Department’s instructions. Retirees should not assume federal treatment carries over. The 2027 booklets will explain how Indiana treats Social Security benefits, IRA and 401(k) distributions, public and private pensions, and other retirement income types. Indiana may allow exclusions or deductions for certain retirement categories, and those provisions can change over time. Gather your SSA-1099 and all 1099-R forms, and wait for the 2027 instructions to confirm what is includable, excludable, or subject to special line entries on the Indiana return.
Some retirement-related provisions are specific to groups such as military retirees or certain public employees. The Department’s instructions will describe any available exclusions or deductions, qualifying ages or service periods, and where to report them on the return. If you split residency during the year, the IT-40PNR allocation rules will guide how to report retirement income and related subtractions. Because amounts and eligibility details are set in the year’s booklets, avoid relying on last year’s numbers. If you rollover funds, convert accounts, or take large distributions in 2027, keep plan statements and confirmations together with your tax documents.
Indiana offers various credits that can reduce your state tax, and the 2027 instruction booklets will provide the eligibility details, income thresholds, and any required enclosures. Credits may be refundable or nonrefundable, and some are limited to full-year residents while others can be allocated on IT-40PNR. The county layer does not change whether a state credit is allowed, but it does affect your total balance due or refund. If you plan to claim credits tied to dependents, adoption, or college expenses, maintain receipts, 1098-T forms, and proof of payment. Verify all 2027 credit amounts using the published instructions before you file or adjust estimates.
Retirees often rely on withholding from pensions or annuities. Payers may allow Indiana withholding elections, but some do not support county withholding. If your payer cannot withhold Indiana or the county piece the way you need, use estimated payments. Revisit your elections after the Department updates county rates in January or October, and confirm that the withholding you see on your 1099-R aligns with what you expected. If you moved or changed residency during 2027, double-check the 2027 instructions for how to handle part-year allocations and any retirement-related subtractions or credits.
For Social Security, the Indiana return instructions will tell you whether benefits are reported, excluded, or simply referenced in a worksheet for 2027. Do not assume that prior-year treatments remain unchanged. Keep your SSA-1099 and any notices of benefits repayment or lump-sum elections with your records. When you complete your Indiana return, the county computation will typically start from your state taxable income as determined by those instruction lines. If you also have rental, interest, or capital gains, include those in your planning so your combined state-and-county estimate reflects all income sources that Indiana taxes for 2027.
IT-40, IT-40PNR, county schedules, estimated payments, and records
Indiana’s form choice hinges on residency. Full-year residents generally file Form IT-40, and part-year residents or nonresidents generally file Form IT-40PNR. Confirm this in the 2027 instructions once posted, especially if your situation includes multiple states, pass-through income, or remote work. The forms walk through state tax, the separate county calculation, and any additions, subtractions, and credits. Always download the current-year forms rather than reusing a prior packet, because line numbers, schedules, and instructions can change as the Department updates guidance and the county rate charts.
The county portion requires data that ties to the Department’s current-year county rate chart and the year’s county assignment rules. The forms include space to report county information, and the instructions explain which entries are needed. Have your residence and, if relevant, Indiana work location details handy, because the rules use a specific “as of” date. If your employer withheld for a different county than the one that applies on your return, the county section will reconcile the difference. Review this area carefully before filing to avoid surprises or delayed refunds.
Estimated payments for 2027 should be based on the confirmed 2.90% state rate plus the applicable county percentage from the Department’s current county chart. If your income is uneven or if county rates change in January or October, adjust your remaining installments. When the 2027 instruction booklets are posted, confirm where to enter prior-year credits and current estimates on your return so they are matched correctly. If you set up electronic payments, label them clearly by tax year and type so you can trace them during filing and, if needed, when speaking with the Department.
Withholding reconciliation is a smart midyear task. Compare your W-2 year-to-date state and county withholding to your projection using the 2.90% state rate and your county’s charted percentage. If you changed residence or work locations, give your employer updated withholding information so remaining paychecks better match where you will end up on the 2027 return. For retirees and investors, review 1099 and payer statements to see if Indiana withholding is occurring and whether county withholding is supported. If not, schedule estimates to close the gap.
Good records make Indiana filing smoother. Keep W-2s with county withholding details, recent paystubs, employer withholding elections, and any reciprocity certificates you submitted. Retain move documents that prove addresses and dates, such as leases, closing statements, and utility start notices. Save copies of the Department’s county rate chart you used, the 2027 instruction pages that guided your decisions, e-file acknowledgments, and proof of estimated payments. Keep prior-year returns and any correspondence from the Department in the same folder so you can reference past entries and quickly verify carryforwards or amended return adjustments.
Connect Indiana state facts to the federal 2027 tax decision that comes next
Indiana begins with federal adjusted gross income, then applies Indiana-specific additions, subtractions, and credits. That means your federal choices—timing income, realizing gains, or taking certain deductions—can change your Indiana number before the 2.90% state rate and any county layer are applied. As you plan for 2027, think in two steps: first, get the federal return directionally right; second, pull the 2027 Indiana instructions to see how the state adapts those federal results. Only then should you apply the county rate from the Department’s current chart for a full picture.
Payroll and quarterly planning often link federal and Indiana levers. If you submit a new federal withholding form midyear, also review your Indiana employee withholding elections so both reflect your current residency and work locations. When the Department updates county percentages in January or October, revisit your plan so your combined withholding and estimates stay aligned with the latest chart. For part-year residents or those working across states, coordinate timing so you neither under-withhold nor significantly over-withhold on the Indiana side.
Some Indiana credits and subtractions reference federal figures or forms. The 2027 booklets will tell you which federal lines flow into Indiana worksheets and whether there are income limits or other qualifications. Keep a clean set of federal documents—W-2s, 1099s, K-1s, and deduction records—so the Indiana entries are straightforward. When in doubt, wait for the 2027 Indiana forms and instructions rather than applying last year’s templates. This prevents misreporting at both the state and the county level and helps avoid year-end surprises.
Retirement planning highlights the state-federal link. If you adjust federal withholding on pensions or take a one-time distribution, immediately estimate the Indiana impact using the confirmed 2.90% state rate and your county’s current percentage. Because some payers do not support county withholding, you may need to create or increase Indiana estimated payments. Document the decision and keep the calculation with your 2027 file so you can quickly update it when the new Indiana booklets release.
Finally, track the 2027 filing season announcements from the Department of Revenue. Watch for the release of the year’s forms, instruction booklets, and county rate charts. Confirm any due dates and e-file opening guidance posted by the Department before you finalize. Aligning your federal finish line with Indiana’s updated materials—especially the county chart—ensures your 2027 return reflects the confirmed 2.90% state rate and the correct county layer based on the year’s definitions and charts.
Verify with primary sources
Official sources to monitor
The information here reflects Indiana Department of Revenue publications and tools: the statewide rates page, the current-year county income-tax rate charts, and the individual IT-40 and IT-40PNR forms with their instructions. Always confirm details in the Department’s 2027 booklets before filing or changing payments.