The lowest headline rate in the Midwest, and the county line that undoes it
Indiana's state income tax is a flat 2.95% for 2026 — one of the lowest in the country, and the number every comparison table quotes. No Hoosier pays it alone. All 92 counties levy their own income tax on the same income, from 0.5% in Porter to 3.0% in Randolph. At the top of that range the county tax is larger than the state tax. Together they land most Indiana workers near 5%, which is the single most common surprise on an Indiana stub.
Two details about the county rate catch people out, and neither is obvious. First, it is the rate of the county you lived in on January 1 — not where you work, and not where you moved in March. Second, the rates are revised every October 1, so the figure you looked up last spring may not be the figure on your December stub. Our calculator takes the county rate as an input for exactly this reason: it defaults to 2.00%, which is our own mid-range placeholder and not a published statewide figure. Type your county's rate in and the local line recomputes.
What an exemption is actually worth on one paycheck
Indiana does not use a percentage-of-wages allowance like the federal W-4. It subtracts a flat dollar amount per exemption, and the state publishes that amount per pay period in the Deduction Constant Tables of Departmental Notice #1 — page 2 of a PDF almost nobody opens. Here is what a single personal exemption removes from your taxable wages before the 2.95% is applied:
| Pay frequency | Deducted per pay |
|---|---|
| Weekly | $19.23 |
| Every two weeks | $38.46 |
| Twice a month | $41.67 |
| Monthly | $83.33 |
| Daily | $2.74 |
One thing in that table is worth knowing before you check it against your own stub: the notice's daily column divides the annual exemption by 365 calendar days, not by 260 working days. That is the state's own arithmetic, and it is why the daily figure looks small next to the weekly one.
The four lines of Form WH-4, and the one nobody claims
Form WH-4 is where you set all of this, and it has four separate exemption lines with three different dollar values:
- Line 5 — personal exemptions, $1,000 a year each (yourself, and your spouse if they don't claim it elsewhere).
- Line 6 — additional dependent exemptions, $1,500 a year each.
- Line 7 — the first-time additional dependent exemption, another $1,500, claimable in the year a dependent first qualifies.
- Line 8 — the adopted child exemption, $3,000 a year, which most payroll calculators do not mention at all.
This page models line 5 only. If you claim dependents on lines 6 to 8, your real withholding is lower than the figure above — we would rather show you slightly too much tax than promise you a refund that isn't there.
Why the county tax uses the same base as the state tax
It would be reasonable to assume the county tax is levied on gross pay. It is not. The county tax sits on the same taxable base as the state tax — after the exemptions above have been subtracted. We checked that against the statute rather than assuming it, because the neighbouring state of Ohio does it differently: Indiana Code 6-3.6-4-1 taxes "the adjusted gross income of local taxpayers", 6-3.6-2-2 sends that definition back to 6-3-1-3.5, and the exemptions are subtractions inside that definition. The full chain, and the trap we avoided along the way, is on our methodology page.