Six Indiana Counties, State Have Tax Rate Changes in 2026

Effective January 1, 2026, the Indiana Department of Revenue (DOR) revised Departmental Notice No. 1, How to Compute Withholding for State and County Income Tax, to reflect changes to county income tax rates and the state withholding tax rate.

County Income Tax Rate Increases

Effective January 1, 2026, six counties have income tax rate increases:

• Carroll County, increasing to 0.024733 from 0.022733
• Grant County, increasing to 0.0275 from 0.0255
• Greene County, increasing to 0.0235 from 0.0215
• Howard County, increasing to 0.0235 from 0.0195
• Shelby County, increasing to 0.017 from 0.016
• Union County, increasing to 0.0275 from 0.02

All 92 of Indiana’s counties impose a county income tax on residents of the county and on nonresidents – who do not reside in another Indiana county – with a principal place of business or employment in the county. Each county has one county income tax rate (i.e., tax rates are the same for residents and nonresidents). Employers withhold state and county income taxes from employees’ wages.

State Withholding Tax Rate Reduction

Also effective January 1, 2026, the Indiana state withholding tax rate decreases to 2.95% from 3%. This means that the state supplemental wage tax rate will decrease to 2.95% from 3%.

Interested in more state and local payroll coverage? PayrollOrg’s PayState Update eNewsletter is perfect for you.

Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.