Your Trusted Financial Partner in Indiana

State Personal Income Tax and Owner Income

Indiana imposes a flat personal income tax on Indiana adjusted gross income, applying the same single rate to all income levels rather than graduated brackets. Owners of sole proprietorships, partnerships, S corporations, and most LLCs generally report their share of business profits on their individual Indiana return, where pass-through income flows through on a Schedule K-1 and is taxed at that flat state rate. On top of the state tax, nearly every Indiana county levies its own Local Income Tax (LIT), which is administered by the state and based on the taxpayer's county of residence or, for some workers, county of principal employment, so an owner's total income-tax burden depends on which county they live in.

Business, Corporate, and Pass-Through Entity Tax

C corporations pay Indiana's flat corporate Adjusted Gross Income Tax on income apportioned to the state. The rate is 4.9 percent and has been since July 1, 2021, the end of a step-down that cut the rate on the first of July in ten consecutive years, from the 8.5 percent that had applied since 2003 down through 8.0, 7.5, 7.0, 6.5, 6.25, 6.0, 5.75, 5.5 and 5.25 percent. Because every one of those cuts landed mid-year, a calendar-year filer whose tax year straddled one paid a blended rate rather than either posted rate: IC 6-3-2-1(c) weights each rate by the number of days it was in effect and rounds the result to the nearest 0.01 percent. That schedule finished in 2021, so 4.9 percent now applies cleanly to a full year, but the proration rule stays in the statute for whenever the rate next moves. Indiana imposes no net-worth tax and no general gross-receipts tax, so an operating company faces income tax rather than a capital- or revenue-based levy.

Indiana does have a franchise tax, and the question is who counts as a financial institution. IC 6-5.5-2-1 imposes the Financial Institutions Tax as a franchise tax on apportioned income, at 4.9 percent for taxable years beginning after December 31, 2022 — the same figure as the corporate AGI rate, but a different return under different rules. It does not stop at banks. The tax reaches any corporation deriving 80 percent or more of its gross income from the business of a financial institution, which the statute defines to include making, acquiring, selling or servicing loans and extensions of credit, leasing that is the economic equivalent of an extension of credit, and operating a credit, debit or charge card business. A company that finances its own customers, carries an equipment leasing book, or buys receivables can cross that 80 percent line without ever describing itself as a lender. Crossing it moves the filing from Form IT-20 to Form FIT-20 and takes the taxpayer out of the adjusted gross income tax altogether, because a Financial Institutions Tax payer is exempt from it rather than paying both. The rate in effect for a taxable year is fixed on the first day of that year even if it changes partway through, and Indiana net operating losses on the FIT-20 carry forward fifteen years with no carryback. Indiana also offers a pass-through entity tax (PTET) election that lets eligible S corporations and partnerships elect to pay Indiana tax at the entity level, a workaround that can help owners around the federal SALT deduction cap; because the election interacts with each owner's credit and the local income tax, the right choice should be confirmed against current DOR guidance.

Sales, Use Tax, and Economic Nexus

Indiana imposes a single statewide sales and use tax and, unusually, does not allow counties or cities to add their own local sales-tax rates, so the rate a business charges on taxable goods is uniform across the entire state. Use tax applies to taxable items bought without Indiana sales tax and then used in the state, which commonly catches equipment and supplies purchased out of state. Remote sellers and marketplace facilitators that exceed Indiana's economic-nexus threshold must register, collect, and remit even without a physical presence, and marketplace facilitators are generally required to collect on behalf of their third-party sellers; businesses with in-state inventory, employees, or locations register and collect under the standard physical-presence rules.

Lodging, Innkeeper's, and Tourism Taxes

Short-term lodging in Indiana is generally subject to the statewide sales tax plus a county innkeeper's tax (also called a county lodging or tourism tax) that funds local tourism and convention efforts, so a hotel, campground, RV-park, or short-term-rental stay can carry both the state sales tax and a separate county tax on the same booking. Innkeeper's tax rates and rules are set county by county, and in many counties the state DOR collects the tax while in some larger counties a local body administers it directly, which changes where an operator registers and remits. Hosts renting through online marketplaces should not assume the platform handles every obligation, because marketplace collection may cover the state sales tax and some innkeeper's taxes but not all county-administered ones, leaving the operator responsible for registering and filing the remainder.

Registration, Filing, and Compliance

Most Indiana businesses register with the Department of Revenue through the INBiz business portal and then file and pay through the INTIME online system, which handles sales, use, withholding, innkeeper's, and income-tax accounts. Sales, use, and innkeeper's taxes are filed on a recurring cadence (monthly, quarterly, or annually) that the state assigns based on a business's tax volume, while corporate and pass-through entity income taxes are filed annually with the entity return and individual owners reconcile their share on the personal return. Operators should keep clear records of gross and exempt sales, county-level lodging tax collected, use-tax accruals on out-of-state purchases, and the county designations that drive local income tax, since those are the most common documentation gaps in an Indiana audit.

Indiana-Specific Nuance for Operators

Indiana is one of the simpler states on the sales-tax side because of its single statewide rate with no local sales-tax stacking, but that simplicity does not extend to lodging or income: the county innkeeper's tax and the county Local Income Tax both vary by jurisdiction and quietly shift an operator's obligations from one county to the next. For campground, RV-park, hotel, and short-term-rental operators, the practical work is identifying the correct county innkeeper's tax, confirming whether the state or a local body collects it, and reconciling it against any marketplace collection. Indiana's relatively low flat corporate rate and its lack of a franchise or gross-receipts tax also make entity-structure and PTET-election decisions more about income timing and the federal SALT cap than about avoiding a capital-based levy.