Indiana Tax Law
Most monetary transactions within Indiana are taxed by the state. There is a tax on almost everything, including food, beverages, restaurant services, gasoline and more. The most money you’ll likely spend on state taxes will be for income taxes, property taxes and sales taxes.
State taxes are essential for living in Indiana because they pay for the amenities and services you rely on both on a daily basis and in emergency situations. Tax revenue helps pay for construction and repairs to roadways and infrastructure, fire and law enforcement services and state programs that benefit the needy and disadvantaged.
Whether you live in Indianapolis, Fort Wayne or Evansville, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Indiana tax law articles to become familiar with them and to avoid penalties.
Indiana Personal Income Taxes
Indiana taxpayers must pay taxes on their income at a state rate of 3.23 percent as of January 2017 regardless of whether they’re filing individually or jointly as married couples. Indiana counties also levy their own additional income tax rates ranging from 0.005 to 0.0338 percent.
Income taxes are levied on a taxpayer’s non-exempt income, including salary, wages, interest, dividends, tips, bonuses, etc. Tax-exempt income includes gifts and inheritances, worker’s compensation, child support, life insurance benefits, etc.
Indiana Property Taxes
In Indiana, local governments rely on property taxes as a critical source of revenue to fund construction, waste management, fire departments and other vital public services. Every county sets its own property tax rate. There is no state property tax rate in Indiana.
Property taxes are levied on the assessed market value of real and personal property in dollars per $1,000. This means that if your Indianapolis (District 101) home’s assessed value in 2016 was $152,000, your tax rate is $3.0273 per $1,000. Therefore, your property tax due is $460.15 ($152,000 multiplied by 0.0030273).
Property taxes are collected on real and personal property only. Real property includes residential and business real estate. Personal property includes business property that isn’t a permanent fixture to real estate—meaning machinery, furniture, tools, gear, etc.
Indiana Sales and Use Taxes
Sales and use taxes are another major source of state tax revenue in Indiana after personal income taxes. Sales taxes are levied on the sale of goods or services within the state. Use taxes are levied against the use of goods and services that were acquired from an out-of-state retailer or seller who didn’t collect the Indiana sales tax from the transaction. Both the sales and use tax rate is seven percent in Indiana.
Indiana Sin Taxes
“Sin” taxes are levied on consumer products like alcohol and tobacco—as well as activities like gambling or wagering—wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.
Indiana levies the following sin taxes:
- $0.995/pack of 20 cigarettes.
- $1.24375/pack of 25 cigarettes.
- $0.40/ounce of moist snuff.
- 24 percent of the wholesale price for all other tobacco products.
- $0.115/gallon of beer.
- $2.68/gallon of liquor with 21 percent or higher alcoholic volume.
- $0.47/gallon of wine with less than 21 percent alcoholic volume.
- $0.20/person admission tax for horse racing at the track or a satellite facility.
- Two percent of the total wager on horse races.