Updated October 4, 2026. Quick answer: Yes. Indiana starts from federal adjusted gross income, so a gain is taxed at the flat state rate, plus county tax. The booklet says “Enter the adjusted gross income from your federal Form”, and the Department’s rate page says “The Indiana Individual adjusted gross income tax rate for 2026 is 2.95%”.
Selling your home? How the state taxes the profit, from its own tax documents: Does Indiana tax the profit from selling your home?.
The same question for dividends and interest: does Indiana tax dividends and interest.
How Indiana treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Taxed as income at the flat state rate; no separate rate for gains printed |
| State rate | 3% for 2025 (IT-40 booklet); 2.95% for 2026, adjusting to 2.90% in 2027 (Department rate page) |
| County tax | Separate: “Complete Schedule CT-40 to figure your county tax and enter it here”; the Department says “County income tax rates may be adjusted in January and October” |
A $50,000 long-term gain
For a gain realized in 2026, the Indiana state tax is computed as $50,000 x 2.95% = $1,475, before county tax.
For a gain realized in 2025 the state tax is computed as $50,000 x 3% = $1,500.
What changes in 2026
The state rate drops to 2.95% for 2026 and, the Department says, to 2.90% in 2027.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether Indiana taxes pensions, how Indiana taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
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Answer againSources
- Indiana DOR: Income tax rates (Rates, Fees & Penalties): https://www.in.gov/dor/resources/tax-rates-and-reports/rates-fees-and-penalties/
- 2025 IT-40 Full-Year Resident Individual Income Tax Booklet: https://forms.in.gov/Download.aspx?id=16915
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.