Key figures
Indiana advisory
2026, with sources
Credits and conformity
Indiana’s research expense credit mirrors the federal increasing-research credit for research carried on in Indiana, computed on Schedule IT-20REC. It is nonrefundable, so its value to a startup is in later years; a carryforward claim needs the prior year’s schedule attached, and DOR denies the credit without it.
Indiana’s fixed-date conformity cuts both ways. It means Indiana did not automatically adopt the 2025 federal tax law, but it also means the General Assembly decides each year which changes to adopt — research costs were addressed in 2026 (Bulletin #127), while bonus depreciation remains an addback.
Remote hires and county tax
Every Indiana county levies a local income tax, and the employer withholds it. The county is fixed on January 1: an employee who lives in Indiana pays the rate of the county they lived in on January 1, all year, even if they move; a nonresident who works in Indiana on January 1 pays the rate of the Indiana county where they work. Rates on the October 1, 2026 chart run from 0.5% in Porter County to 3% in Randolph County, with Marion County (Indianapolis) at 2.02%.
For short visits, DOR’s 30-day rule lets an employer skip Indiana withholding for a nonresident reasonably expected to work in Indiana 30 days or less in the year, provided its time system records work location, or the employee gives Form WH-4AFF.
Where founders go wrong in Indiana
Indiana is simple at the top — a low flat rate, a single sales tax rate, no state paid leave program — and particular underneath.
- Withholding the wrong county, or changing it mid-year when an employee moves.
- Treating Indiana as a rolling-conformity state and copying federal depreciation onto the IT-20.
- Missing the biennial business entity report and being administratively dissolved five months later.
- Still counting 200 transactions for sales tax nexus; Indiana dropped that test in 2024.
- Expecting the R&D credit to produce a refund; it is nonrefundable.
The federal baseline
This page covers what Indiana adds. The federal rules underneath it apply here too.
Common questions
Is there an Indiana R&D credit?
Yes. Indiana’s research expense credit, computed on Schedule IT-20REC, works like the federal credit for qualifying research done in Indiana. It is nonrefundable and limited to the adjusted gross income tax, so a pre-revenue company can only carry it forward; the IT-20 instructions require the prior-year schedule to be attached when a carryforward is claimed.
Does Indiana follow the federal QSBS exclusion?
Indiana starts from federal adjusted gross income, so the federal exclusion generally flows through. Indiana adopts the Code as of a fixed date, though, so a founder selling stock that relies on a recent federal change should check that Indiana has adopted it for the year of sale.
Advisory next door
- ILIllinois advisoryIllinois offers a nonrefundable 6.5% R&D credit, caps net loss deductions, and from 2026 taxes QSBS gain the IRS excludes; most founder mistakes come from Chicago’s extra layer.
- KYKentucky advisoryKentucky’s state rates are moderate, but local occupational license taxes on wages and profits, a sales tax that reaches SaaS and a $175 minimum LLET catch startups, and 2026 conformity skips Section 174A.
- MIMichigan advisoryMichigan’s refundable R&D credit, new for 2025, pays even pre-revenue companies; the rest of the advisory work is the Section 174 decoupling and 24 city income taxes.
- OHOhio advisoryOhio’s 7% R&D credit offsets only the CAT, which most startups no longer owe; the advice that matters is about cities, remote hires and the state-run workers’ comp fund.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- EquityStock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
- RunwayBurn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.
More of the Indiana guide
- AccountingAccounting and state tax in IndianaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in IndianaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in IndianaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in IndianaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in IndianaRegistering to do business, annual reports, franchise tax and the filing calendar
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.