Taxes in Indiana: Features and Advantages

Main Taxes in the State of Indiana

Income Tax:

Indiana levies a flat personal income tax. The rate for 2025 is 3.05%, with a planned gradual reduction to 2.9% by 2027. Additionally, each county imposes a local income tax (County Income Tax), with rates ranging from 1% to 3.4% depending on the taxpayer’s residence. The tax applies to all types of income.

Sales Tax:

The base sales tax rate in Indiana is 7%, uniform across the state without local surcharges. Sales tax applies to most goods and certain services, including equipment rentals, digital products, and repairs. Exemptions include groceries, prescription medications, certain medical supplies, and manufacturing equipment.

Determining the taxable base and applying the correct sales tax rate requires knowledge of state law and business specifics. Our company provides services for obtaining a Sales Tax Certificate, as well as preparing and filing Sales and Use Tax Returns. We advise business owners on registration, calculation, and reporting.

Property Tax:

In Indiana, property tax is regulated at the county and municipal level. The average effective rate is about 0.85% of assessed property value. Rates can vary significantly depending on region and property type. Indiana applies caps on property tax growth for primary residences (*homestead*), agricultural land, and rental properties.

Business Taxes:

C‑corporations are taxed at a rate of 4.9% in 2025. The tax base is defined as federal adjusted gross income (AGI) with certain modifications.

LLCs, corporations, and partnerships must file a Business Entity Report with the Indiana Secretary of State. Filing is required every two years by the end of the registration anniversary month.

Excise Taxes:

Indiana levies excise taxes on categories such as fuel (gasoline, diesel), alcohol, tobacco products, slot machines, and more. Some excise taxes depend on the place of sale and consumer category.

Favorable Tax Conditions in Indiana:

Indiana is recognized as one of the most business-friendly states in the Midwest thanks to:
• Low flat personal income tax rate,
• Uniform sales tax without local surcharges,
• Simple reporting and registration requirements,
• No estate or gift tax,
• Moderate property tax with protections for primary residents.

Taxes in Indiana Compared to Other States:

Compared to Illinois, Michigan, and Ohio, Indiana offers lower tax burdens and a predictable reporting system.
The absence of a gross receipts tax makes the state attractive for companies with high turnover and low margins, while relatively low property tax, simple company registration, and accessible infrastructure support the growth of small and medium-sized businesses.