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Personal income taxes

Taxable income

How is taxable personal income determined in your state?

Indiana starts with adjusted gross income as defined in Section 62 of the Internal Revenue Code and then makes certain adjustments specified by statute (Ind. Code § 6-3-1-3.5).

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

An individual is deemed a resident if, during the taxable year, the individual is domiciled in Indiana or maintains a permanent place of residence in Indiana and spends more than 183 days in the state. In recent years, Indiana has been very aggressive in claiming residency particularly for individuals moving from Indiana but keeping a place of residence in the state.

Rates

What are the applicable personal income tax rates?

There is a single state tax rate. In 2018 the state tax rate is 3.23%.  Additionally, each county in Indiana also applies a single county income tax rate, ranging from 0.35% to 3.38% in 2018.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

There are myriad exemptions, deductions and credits. There are limited deductions for:

  • military pay;
  • rent payments;
  • permanently and totally disabled individuals; and
  • unemployment compensation.

There are also credits for taxes paid to other states, a limited credit for charitable contributions to colleges, a limited credit for the elderly (aged 65 and over), and a child credit, among others.

Filing requirements

What filing requirements and procedures apply?

There are various filing requirements and procedures for filing returns, including estimated tax returns and annual returns, as well as procedures for audits and appeals. Annual returns and tax payments are due on 15 April, but the return can be extended. Annual estimated tax payments are due on the same dates as federal estimated tax payments.

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Indiana imposes payroll tax collection and remittance obligations on employers with respect to its wages paid to its employees. Every employer must withhold Indiana adjusted gross income tax on wages paid to its employees and must generally remit those taxes to IDOR within 20 days of the end of the month in which the wages were withheld.

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