The Indiana Department of Revenue announced that the counties of Monroe, Parke and Posey have changed their local withholding income tax rates effective October 1, 2016. Departmental notice #1 September 28, 2016.)

The changes are as follows:

— Monroe — The resident rate increased from .01095 to .01345. The nonresident rate increased from .0027375 to .0033625.

— Parke — The resident rate increased from .0245 to .0265. The nonresident rate is unchanged.

— Posey — The resident rate increased from .01 to .0125. The nonresident rate increased from .00625 to .006875.

Future rate notices will reflect law changes

As we previously reported, HB 1485 requires that local income taxes collected by Indiana counties be consolidated into one local income tax rate per county. The bill also requires that both residents and nonresidents living and/or working in the county pay at one local income tax rate, increasing the local taxes paid by nonresidents. (Tax Alerts 2015-922 and 2016-1489.)

As a result, this is the last Departmental Notice #1 that will list separate resident and nonresident rates. Effective January 1, 2017, the Department will publish one local income tax rate in Departmental Notice #1 and in its return instructions for tax years starting in 2017.

For more information, see Department Notice #42.

State income tax rate to decrease in 2017

As we reported in Tax Alert 2014-2338, the state individual income tax rate was reduced from 3.4% to 3.3% effective for calendar years 2015 and 2016, and is scheduled to be further reduced to 3.23% for 2017 and later years. (HB 1001, PL 205, signed by the governor on May 8, 2013.)

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