Updated October 8, 2026. Quick answer: For 2026 Indiana’s state adjusted gross income tax rate for individuals is 2.95%, a single flat rate with no brackets, according to the Department of Revenue’s Departmental Notice 1. The notice is a withholding document: it prints exemption deductions for withholding but no standard deduction.
The 2026 Indiana rate
| Taxable income | Rate |
|---|---|
| All adjusted gross income, every filing status | 2.95% |
Departmental Notice 1 states: “the state adjusted gross income tax rate for individuals is 2.95%”. The notice carries an effective date for withholding of October 1, 2026. It prints one rate and no separate schedule for other filing statuses.
Exemptions printed in the notice
| Item | Withholding deduction |
|---|---|
| Personal exemption | $1,000 per year per exemption claimed |
| Qualifying dependent | $1,500 per year |
| Adopted child | $3,000 per year |
These are the withholding deductions in the notice (“Each employee is entitled to deduct $1,000 per year per exemption claimed on line 5 of his/her Form WH-4.”). They apply to withholding calculations, not to the return, and the notice prints no standard deduction.
A worked example
As a computed example (an illustration, not a source figure), take $100,000 of Indiana taxable income. At the flat 2.95% the tax is $2,950 (computed). Taxable income is the figure after the deductions the Indiana return allows.
What this page does not say
The rate comes from a withholding notice, not from the statute or the IT-40 instructions, neither of which was read for this page. The notice does not show the 2025 rate or any future rate step.
Common mistakes
- Looking for brackets. The notice prints one rate.
- Reading the notice’s October 1, 2026 date as the start of the 2026 rate. It is the withholding date; the notice states the rate for 2026.
- Treating the notice’s withholding exemptions as the exemptions on the return.
Related: how Indiana taxes retirement income, whether Indiana taxes pensions, how Indiana taxes capital gains, and the federal 2026 tax brackets.
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Answer againSources
- Indiana Department of Revenue, Departmental Notice #1 (R47 / 10-26) How to Compute Withholding for State and County Income Tax: https://www.in.gov/dor/files/dn01.pdf
- Indiana Department of Revenue (where later updates appear; no figure on this page comes from it): https://www.in.gov/dor/
Sources: the primary documents linked above, read on October 8, 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.