Indiana Payroll Tax Guide (2026)

Indiana runs a single flat state rate of 2.95% for 2026, but every paycheck also carries a county income tax set by the employee’s county of residence on January 1, ranging from 0.5% in Porter County to 3.0% in Randolph County.^[7]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: DOR, DWD, IRS

Quick Facts

Indiana payroll at a glance

Indiana employers handle three payroll taxes: state adjusted gross income tax withholding at 2.95%, a county income tax withheld alongside it, and employer paid unemployment insurance premiums. Employees pay no state unemployment or disability contribution.^[7]

State income tax withholding

2.95% flat ^[1]

UI taxable wage base

$9,500 per employee ^[7]

New employer UI rate

2.50% ^[7]

Experienced UI rate range

0.50%–7.40% ^[7]

Employee-paid state payroll tax

None ^[7]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[14]

State minimum wage

$7.25 per hour (federal floor) ^[10]

Local minimum wage ordinances

None ^[10]

UI registration trigger

Paying $1 or more in remuneration to a covered worker, acquiring the… ^[7]

Exempt salary threshold

$35,568 per year ^[13]

Additional Medicare threshold

Over $200,000, employee only ^[3]

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What changed for Indiana payroll in 2026

Five items moved for Indiana employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

State rate set at 2.95% Six counties change LIT rates County rates span 0.5% to 3.0% UI wage base holds at $9,500 Minimum wage stays $7.25

Withholding county tax for the wrong county: Indiana county tax follows where the employee lived on January 1, not where your office sits. Employers who default every worker to the county of the worksite over collect for some and under collect for others. The fix is a current Form WH-4 from every employee at the start of each year, since that form is what establishes the county for payroll.

Estimate

2026 Indiana payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Indiana · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate comes from Indiana Department of Workforce Development each year.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $9,500–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Form WH-4 and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

Indiana runs two state payroll taxes. The table below is the whole state layer for 2026.^[7]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.50%–7.40%; 2.50% new	$9,500
Income tax withholding	Employee	2.95% flat	No limit

Indiana does not publish lettered rate schedules. New employers hold a fixed rate by industry for their first four calendar years, then move to an experience based merit rate between 0.50% and 7.40%, with delinquent employers assessed up to 9.40%.^[7]

Who has to register

Paying $1 or more in remuneration to a covered worker, acquiring the assets of an existing Indiana employer, having FUTA liability in another state, paying $1,000 or more in cash wages for household services in a quarter, or, for a 501(c)(3), employing four or more individuals in 20 different weeks.^[7] Income tax withholding is administered separately by Indiana Department of Revenue, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in Indiana generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[7]

How to register

Cross the wage threshold→
Employer Self Service (ESS)→
Receive account number→
File & deposit online

Returns, reports & due dates

Form	What it is	Due
Quarterly wage and contribution report filed in ESS; paper Form UC-5 is accepted only with an electronic filing waiver.	Quarterly unemployment return	April 30, July 31, October 31, January 31
Form WH-1 withholding return for each assigned filing period, and Form WH-3 annual…	Income tax withholding returns	Per assigned schedule
Annual reconciliation	Year-end withholding reconciliation	January 31
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[7]

Pricing

Payroll Pricing

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Line items the big providers quietly bill for

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Setup fee

one-time onboarding

billed
extra

Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[7]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $9,500 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In Indiana that is $9,500 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating: The method Indiana Department of Workforce Development uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Form WH-4: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Indiana Department of Revenue.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Local withholding: Income or occupational tax levied by a city, county or school district and withheld by the employer alongside state tax. It is assessed separately from the state layer.

Federal, State & Local

Indiana payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

Indiana has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[14]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	2.50%	$9,500
UI, experienced	0.50%–7.40%	$9,500
Income tax, standard	2.95% flat	No limit

Layer 3, county & city: a real third layer

Indiana counties levy a local income tax that the employer withholds on the same WH-1 return as the state tax, so there is no separate local filing. The rate follows the employee’s Indiana county of residence as of January 1, and an out of state resident who works in Indiana uses the Indiana county of the principal place of work or business. For 2026 the published county rates run from 0.5% in Porter County to 3.0% in Randolph County, and Departmental Notice #1 is the official rate chart.^[1]

The state minimum wage is $7.25 an hour, which is the federal floor, effective 2026-01-01. The tipped cash wage is $2.13. No local ordinance sets a higher floor. The federal wage and hour tables list a single statewide Indiana rate with no city or county minimum wage rates.^[10]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) Federal FLSA standard salary level, and only if the duties test is also met. Paying a salary is not by itself enough.^[13]

FAQ

Indiana payroll FAQs

The Indiana adjusted gross income tax rate is 2.95% for pay periods beginning on or after January 1, 2026. It is a single flat rate with no brackets. County income tax is withheld on top of it and reported on the same WH-1 return.

Use the employee’s Indiana county of residence as of January 1. If the employee is not an Indiana resident but works in Indiana, use the Indiana county of the principal place of work or business. Form WH-4 is what establishes that county for payroll, and county rates can also change on October 1.

Premiums are based on the first $9,500 of gross wages per employee per calendar year. Most new employers pay 2.5% for their first four calendar years, and experience rated employers fall between 0.50% and 7.40%. Delinquent employers can be assessed as high as 9.40%.

The WH-3 annual withholding reconciliation is due January 31. Unemployment quarterly wage reports are due April 30, July 31, October 31 and January 31. Withholding is filed through INTIME and unemployment through Employer Self Service.

Indiana’s minimum wage is $7.25 an hour, the same as the federal rate, and a tipped employee may be paid a cash wage of $2.13 with a tip credit of up to $5.12. For white collar exemptions Indiana relies on the federal FLSA standard salary level of $684 a week, or $35,568 a year.

No. Indiana has no employee paid unemployment, disability or paid leave contribution. Employees see state and county income tax withholding only, and the employer pays the unemployment premium in full.

$7.25 an hour, which matches the federal floor. No local ordinance sets a higher rate. The tipped cash wage is $2.13.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 4 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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Indiana alone means its own registration, its own deposit calendar and its own year-end reconciliation. Add a second state and the work compounds rather than doubles. CrownGlobe runs multistate payroll end to end: registration, deposits, quarterly returns and year-end.

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