Indiana Payroll Compliance 2026: County Tax Guide

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Minimum Wage & Hours

Indiana’s minimum wage matches the federal floor of $7.25/hour with no state-level increase. Attempted local increases in some Indiana cities do not apply to private employers under current state preemption law.

Item	2026 Value	Notes
State minimum wage	$7.25/hr	Matches the federal FLSA floor
Overtime rule	40 hrs/week	Federal FLSA; no separate state overtime rule
Local wage ordinances	Preempted	City attempts to raise local minimums don’t apply to private employers

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County Income Tax

Every one of Indiana’s 92 counties can levy its own income tax rate on top of the state’s flat rate. The tax is based on the employee’s county of residence as of January 1, not where they physically work — the opposite of how most local-tax states operate.

Item	2026 Value	Notes
County tax basis	Residence, not work location	Determined by county of residence as of January 1 each year
Rate range	Varies by county	6 counties raised their rates for 2026 — confirm current rate via DOR Departmental Notice #1
30-day rule	Nonresident exemption	No IN withholding required if a nonresident works in IN 30 days or less in the tax year
Required certificate	Form WH-4	Also captures the employee’s county of residence code

Illustrative Indiana county tax rates, 2026

Rates vary meaningfully county to county

Six counties raised rates for 2026 — always confirm the specific county via DOR’s Departmental Notice #1 before running payroll.

Marion Co. (Indianapolis)

~2.02%

Vanderburgh Co. (Evansville)

~1.25%

Hamilton Co. (Carmel/Fishers)

~1.025%

Illustrative rates only — all 92 counties set independently and 6 changed for 2026. Confirm the exact current rate via DOR Departmental Notice #1 before payroll.

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Mid-year moves require an immediate update

Because Indiana county tax is based on residence, not work location, an employee who moves to a different Indiana county mid-year changes their withholding rate immediately — not at the next January 1. Payroll systems that only check county tax at hire, without a process for address changes, will systematically under- or over-withhold.

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State Income Tax Withholding

Indiana’s flat state rate dropped to 2.95% for 2026. Indiana also conforms to the federal One Big Beautiful Bill Act, exempting qualified tips and overtime from both state and county income tax for 2026.

Item	2026 Value	Notes
State flat rate	2.95%	Down from prior years; effective Jan 1, 2026
Personal exemption	$1,000/year	Per exemption claimed on Form WH-4
Qualified tips/OT exemption	Matches federal OBBBA	Up to $12,500 single / $25,000 MFJ exempt from state + county tax
Reciprocity	KY, MI, OH, PA, WI	Residents file Form WH-47 to exempt Indiana withholding

Indiana state flat tax rate

3.23% → 2.95% since 2022

Indiana has cut its flat rate every year for several years running under a legislated multi-year reduction schedule.

3.23%

3.15%

3.05%

3.00%

2.95%

20222023202420252026

State rate only — excludes the additional county income tax layer.

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Unemployment Insurance (SUI)

Item	2026 Value	Notes
SUI taxable wage base	$9,500	Per employee, per year
New employer rate	2.5%	Standard initial rate
Experienced range	0.50% – 7.40%	Based on claims history

2026 Indiana SUI rate range

Where Indiana employers land

Minimum experienced, new-employer, and maximum experienced rates for 2026.

Maximum (worst experience)

7.40%

New employer

2.50%

Minimum (best experience)

0.50%

Bars scaled to the 7.40% ceiling. On the $9,500 wage base, best-vs-worst experience ranges from $47.50/employee/year to $703/employee/year.

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Official Indiana .gov Resources

IN DOR ↗

in.gov/dor

Withholding rates, county tax notices, and Form WH-4.

IN DWD ↗

in.gov/dwd

Dept. of Workforce Development — SUI rates and filing.

Indiana Payroll Compliance