Key figures
Indiana payroll
2026, with sources
State and county withholding
Indiana withholds two income taxes from every paycheck: the state rate, 2.95% for 2026 and 2.90% from 2027, and a county rate set by the county the employee lived in (or, for a nonresident, worked in) on January 1. Departmental Notice #1 lists all 92 counties and is updated when counties change rates, in January and October. Employees claim exemptions on Form WH-4 and declare their January 1 county there.
Consider a startup based in Chicago that hires its first Indiana employee, a salesperson living in Carmel (Hamilton County). It registers with DOR through INBiz for withholding, withholds 2.95% state tax plus Hamilton County’s 1.1%, files WH-1 returns for every period and a WH-3 each January, opens a DWD account, and reports the hire to the Indiana New Hire Reporting Center within 20 days.
Unemployment and wages
Indiana unemployment premiums are charged on the first $9,500 of each employee’s wages. A typical new employer pays 2.5% — at most $237.50 per employee a year — with new employers assigned fixed rates by industry until they have enough history for an experience rate.
Indiana’s minimum wage is $7.25 an hour, the same as the federal rate. There is no state paid family leave program and no paid sick leave mandate. Workers’ compensation coverage is required for employees and is overseen by the Worker’s Compensation Board.
Out-of-state employees and reciprocity
Indiana has reciprocal agreements with neighboring states, including Michigan and Ohio, under which residents of those states working in Indiana are taxed by their home state. Outside reciprocity, the 30-day rule spares an employer from withholding for a nonresident who works in Indiana only briefly, and requires catch-up withholding once they pass 30 days.
Deadlines
- As assigned by DORState and county withholding return, filed every period even with no payrollForm WH-1
- Jan 31Annual withholding reconciliationForm WH-3
- Within 20 days of hireNew-hire report to the Indiana New Hire Reporting Center
The federal baseline
This page covers what Indiana adds. The federal rules underneath it apply here too.
Common questions
Which county tax do we withhold?
The county is fixed on January 1. An Indiana resident pays the rate of the county they lived in on January 1 for the whole year; a nonresident pays the rate of the Indiana county where they worked on January 1. If someone moves from Hamilton County (1.1%) to Marion County (2.02%) in March, you keep withholding at Hamilton’s rate until the next January.
Our out-of-state employee visits the Indiana office sometimes. Do we withhold?
A nonresident reasonably expected to work in Indiana 30 days or less in the year can be left off Indiana withholding if your time system records out-of-state work locations or the employee gives you Form WH-4AFF. Once they pass 30 days, you withhold for the whole period, including the first 30 days.
Payroll next door
- ILIllinois payrollIllinois withholds a flat 4.95%, charges UI on the first $14,250, and requires 40 hours of paid leave — or Chicago’s 40 plus 40, at Chicago’s higher minimum wage.
- KYKentucky payrollKentucky payroll is 3.5% state withholding plus local occupational taxes where employees work, unemployment insurance at 2.7% on $12,000 for new employers, and workers’ comp from the first employee.
- MIMichigan payrollMichigan withholds a flat 4.25%, charges new employers 2.7% UI on the first $9,000, pays $13.73 an hour in 2026, requires paid sick time from every employer and has 24 city income taxes.
- OHOhio payrollOhio payroll carries state, city and school district income taxes, UI on the first $9,000 plus a 0.15% fee for 2026, and no state paid leave program.
How Indiana compares
- No tax on wagesStates with no state income tax on wagesIndiana: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programIndiana: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesIndiana: city, county or district taxes on wages. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
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
- ComplianceCompliance and filings in IndianaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in IndianaCredits, incentives and the decisions that are cheaper to get right the first time
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.