Use our free online payroll calculator to determine your net pay or take-home pay in Indiana by entering your period or yearly income and the necessary federal, state, and local W4 information. Indiana has a flat tax rate of 3.25% and local taxes up to 6%, depending on which county you live in.
So you're considering to move to Indiana to start a new business or a job career and wondering what would be the cost of your employment or earning as an employee than you must read this guide. This guide will give an overview of the thing you must know before moving to Indiana State along with complete details of what you are going to take home in a paycheck. And employers will also be assisted simultaneously for calculating the paycheck for their employees.
So let's get started!
Indiana, also known as "Crossroads of America" is located in the Midwestern and Great Lakes regions of North America. It is the 17th most populated state and 38th largest by the area compared to others across the nation.
This highly underrated state has wonderful opportunities and can provide a high-quality life at an affordable price. Cities like Bloomington, South Bend, and Carmel have tremendous scenic views, universities, job opportunities and act as economic hubs to Indiana.
Indiana is always ranked high for job and business opportunities due to its diverse economy that depends on chemicals, transportation, agriculture, automotive, healthcare, and pharmaceuticals. This state offers a minimum wage rate of $7.25 and a relatively lower state income tax rate of flat 3.23%. However, all counties of this state also charge local income tax.
The Hoosier State also offers quality education with nationwide ranked 4-star schools, colleges, and in-state universities, that would save you thousands of bucks, in contrast to getting out-of-state education.
Along with quality Income opportunities and Education, this state also has a lower cost of living, which is ranked as the fifth-lowest at 9%, in the United States. With the median house value of $132,304, median monthly rent price of $1,000 and comparatively lower property taxes, this place is crazy-affordable.
This State also offers plenty of outdoor activities and green spaces with numerous state parks like Indiana Dune National Park, plenty of relaxing resorts, hundreds of beautiful lakes and 25 miles of beaches to make your weekend memorable, fun and healthy.
So, after reading all the earlier mentioned perks, you would have made up your mind moving here. As our main focus is a paycheck, here are some of the tax facts followed by a detailed guide on how to calculate a take-home pay of an employee:
To calculate Take Home Pay or Paycheck, you need to go through several steps that include calculation of Gross Pay, Pre-Tax Deductions, Federal Taxes, State Taxes, Post Tax Deductions, Local Tax, etc.
To make it easy for you, we have divided this guide into steps, which would give a general idea. However, there may be some differences or additional taxes that you may be subjected to, according to your situation. As it's a comprehensive guide, we can only discuss general aspects.
Hourly Base Employees are paid for each hour they work in a day or a week, at the mutually agreed hourly rate. However, the mutually agreed hourly rate must be as per the Federal and State Minimum Wage law.
Hourly Employees are also entitled to receive overtime, for each excess hours worked after Regular worked hours in a day or week. The overtime rate in most of the states is one and a half times the regular hourly rate.
Salaried employees receive a fixed but mutually agreed on pay, for a decided pay frequency, usually semi-monthly or monthly. However, for gross payment determination for a pay period, the annual salary is divided by the pay frequency.
Most of the salaried employees are exempted from Overtime law. Therefore, they are not entitled to receive overtime, regardless of how many excess hours they work. However, some exceptional salaried employees may be eligible to receive overtime according to federal or state law.
Pre-Tax Deduction is an amount deducted from employee's gross pay before any withholding tax is deducted. These deductions have several advantages, including the reduction of taxable wages. Hence, increasing the take-home pay of an employee. However, not all deductions can be considered as free from all taxes, which means some of the deductions may require certain taxes to be withheld.
Some of the standard Pre-tax deductions are:
Note: Pre-Tax deduction rate changes from year to year, according to inflation and costs of living by the federal government. Therefore, you must keep yourself updated with all rates before making any deductions.
Federal Taxes are taxes deducted from almost every employee, regardless of which state or county they work in.
Federal Taxes are calculated according to the details provided by the employee on Form W-4, which comprises of income, filing status, number of dependents, number of allowances, number of jobs, etc.
The details are form W-4, are assessed and used by the employer to deduce the federal tax bracket, in which the employee's taxable wage lay upon.
Federal Taxes ranges from 0% to 37% have seven tax brackets, depending on filing status, income, and the number of allowances claimed. Below is the income tax details for the year 2024:
Taxable Income | Rate |
---|---|
$0 - $9,700 | 10% |
$9,700 - $39,475 | 12% |
$39,475 - $84,200 | 22% |
$84,200 - $160,725 | 24% |
$160,725 - $204,100 | 32% |
$204,100 - $510,300 | 35% |
$510,300+ | 37% |
Taxable Income | Rate |
---|---|
$0 - $19,400 | 10% |
$19,400 - $78,950 | 12% |
$78,950 - $168,400 | 22% |
$168,400 - $321,450 | 24% |
$321,450 - $408,200 | 32% |
$408,200 - $612,350 | 35% |
$612,350+ | 37% |
Taxable Income | Rate |
---|---|
$0 - $9,700 | 10% |
$9,700 - $39,475 | 12% |
$39,475 - $84,200 | 22% |
$84,200 - $160,725 | 24% |
$160,725 - $204,100 | 32% |
$204,100 - $306,175 | 35% |
$306,175+ | 37% |
Taxable Income | Rate |
---|---|
$0 - $13,850 | 10% |
$13,850 - $52,850 | 12% |
$52,850 - $84,200 | 22% |
$84,200 - $160,700 | 24% |
$160,700 - $204,100 | 32% |
$204,100 - $510,300 | 35% |
$510,300+ | 37% |
Along with Federal Withholding, employers are also required to withhold Federal Insurance Contributions Act (FICA) taxes from the employee's paycheck as well as pay a matching amount themselves to the IRS.
There are two types of FICA taxes:
Employers are entitled to withhold 6.2% from the first $132,900 (wage base limit for 2024), taxable wages earned by the employee. Moreover, the employer is also required to pay an equal amount to the IRS for each employee.
Medicare tax is another type of FICA Tax that an employer must withhold from the taxable gross wage of the employee, at the rate of 1.45%. Unlike social security, there is no wage base limit. However, if the employee earns more than the defined threshold than he/she is subjected to an additional 0.9% of the Additional Medicare Tax rate, for every dollar earned above the threshold amount.
Like Social Security, IRS also requires the employer to pay an equal amount of Medicare tax for each employee.
The Federal Unemployment Tax Act (FUTA) is a tax that the IRS requires the employer to pay without deducting anything from the employee's paycheck.
The FUTA Tax rate for 2024 is 6.0% of the first taxable wage up to $7000 of an employee. However, once the taxable wage limit is crossed for a particular employee, then the employer no longer has to pay this tax.
What to reduce FUTA Tax?
Yes! Then you must pay State Unemployment Insurance (SUI) tax in full and on time and get a FUTA tax credit of up to 5.4%. Which means, you saved a whopping 90% from FUTA Tax.
Although, employers are not required to withhold any amount as a post-tax deduction, unless if an employee voluntarily asks to do so. However, there are some deductions ordered by the court like child support or wage garnishment, which the employer is entitled to deduct.
As we have calculated Federal Payroll taxes, now it's time to calculate Indiana State Payroll Taxes. The State requires the employer to pay some taxes himself and rest to withhold from the employee's paycheck. Following are the State payroll taxes that usually most of the employers and employees pay:
The state requires the employer to withhold the Indiana State income tax from the employee's paycheck, according to the details provided by the employee on Form WH-4, which contain all the necessary details of the employee such as filing status, a number of allowances to claim, etc. This form is filled by the employee at the starting of the job. The employee must ensure that the form is updated regularly when any significant event occurs like marriage, divorce or child's birth.
The employee working in Indiana are taxed at a flat income tax rate of $3.23, regardless of filing status and income level. Unlike some other states, Indiana state taxes the supplemental wage and bonuses at the same rate as the regular wage.
Note: Employees are suggested to study and deduce the optimal number of Allowances to claim from Indiana State tax, as these allowances can significantly affect your take-home pay. Remember choosing more than requires a number of allowances may lead to underpayment of taxes that may lead to a penalty. On the other hand, choosing less than the required number of allowances will cause your paycheck amount to reduce, as you will be lending tax-free money to the state for a whole year.
Besides, State income tax, Indiana State also entitles the employers to pay State Unemployment Insurance (SUI) Tax at the rate range from 0.5% to 7.4% on the first $9500 earned by each of their employees. However, New Employers are given relief to pay on a flat rate of 2.5% for wages earned by each employee.
Along with Federal Taxes and State Taxes, Indiana residents and non-residents are also subjected to local income tax. These taxes are charged according to the county in which they are working. The following table shows the county names and their tax rates:
County | Resident and Nonresident Local Tax Rate |
---|---|
Adams | 1.6240% |
Allen | 1.4800% |
Bartholomew | 1.7500% |
Benton | 1.7900% |
Blackford | 1.5000% |
Boone | 1.5000% |
Brown | 2.5234% |
Carroll | 2.0733% |
Cass | 2.5000% |
Clark | 2.0000% |
Clay | 2.2500% |
Clinton | 2.2500% |
Crawford | 1.0000% |
Daviess | 1.5000% |
Dearborn | 0.6000% |
Decatur | 2.3500% |
DeKalb | 2.1300% |
Delaware | 1.5000% |
Dubois | 1.0000% |
Elkhart | 2.0000% |
Fayette | 2.3700% |
Floyd | 1.3500% |
Fountain | 2.1000% |
Franklin | 1.5000% |
Fulton | 2.3800% |
Gibson | 0.7000% |
Grant | 2.2500% |
Greene | 1.7500% |
Hamilton | 1.0000% |
Hancock | 1.7000% |
Harrison | 1.0000% |
Hendricks | 1.5000% |
Henry | 1.5000% |
Howard | 1.7500% |
Huntington | 1.7500% |
Jackson | 2.1000% |
Jasper | 2.8640% |
Jay | 2.4500% |
Jefferson | 0.3500% |
Jennings | 2.5000% |
Johnson | 1.0000% |
Knox | 1.0000% |
Kosciusko | 1.0000% |
LaGrange | 1.6500% |
Lake | 1.5000% |
LaPorte | 0.9500% |
Lawrence | 1.7500% |
Madison | 1.7500% |
Marion | 2.0200% |
Marshall | 1.2500% |
Martin | 1.7500% |
Miami | 2.5400% |
Monroe | 1.3450% |
Montgomery | 2.3000% |
Morgan | 2.7200% |
Newton | 1.0000% |
Noble | 1.7500% |
Ohio | 1.2500% |
Orange | 1.7500% |
Owen | 1.3000% |
Parke | 2.6500% |
Perry | 1.8100% |
Pike | 0.7500% |
Porter | 0.5000% |
Posey | 1.2500% |
Pulaski | 3.3800% |
Putnam | 2.0000% |
Randolph | 2.2500% |
Ripley | 1.3800% |
Rush | 2.1000% |
Scott | 2.1600% |
Shelby | 1.5000% |
Spencer | 0.8000% |
St. Joseph | 1.7500% |
Starke | 1.7100% |
Steuben | 1.7900% |
Sullivan | 0.6000% |
Switzerland | 1.0000% |
Tippecanoe | 1.1000% |
Tipton | 2.6000% |
Union | 1.7500% |
Vanderburgh | 1.2000% |
Vermillion | 1.5000% |
Vigo | 2.0000% |
Wabash | 2.9000% |
Warren | 2.1200% |
Warrick | 0.5000% |
Washington | 2.0000% |
Wayne | 1.5000% |
Wells | 2.1000% |
White | 1.3200% |
Whitley | 1.4829% |
Once you are done with all elements (steps) discussed earlier, you will have a net pay amount for each employee. Now all you have to do is pay employees on time. Also, to file all Federal Taxes, State Taxes, FICA, and FUTA taxes on time, to avoid any penalties.
Answer: Indiana State charges a flat rate of 3.23% of Income-tax, regardless of income level and filing status. Besides, different counties in Indiana also charge a local income tax, ranging from 0.35% to 3.38%. Moreover, Indiana residents are also subjected to Federal Income tax and FICA tax.
Answer: Indiana residents are charged with federal income tax, on progressive rates that range from 0% to 37%, depending on the filing status and income level. Moreover, they are also entitled to pay other federal payroll taxes like FICA taxes that comprise of Social Security (6.2%) and Medicare (1.45%).
Answer: Indian State a moderately tax-friendly state especially for retirees. The state's average effective sales tax rate is 7% and the property tax rate is 0.87% is low as compared to other states. Whereas, Social Security income is exempted from state income tax with a flat rate of 3.23%. However, most of the other incomes are not exempted. The Indiana Residents are also charged with a local income tax with a rate range from 0.35% to 3.38%, depending on which county they are working in.
Answer: Residents and non-residents employees and employers of Indiana are charged with the following payroll taxes:
Answer: The average weekly wage in Indiana (in 2024) is around $1200, according to the U.S. Bureau of Labor Statistics.
Answer: Livable wage for a single adult is $11.07, for a couple (one working) with one child is $17.79 and for a couple (both working) with two children is $15.15.