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October 7, 2021
2021-1816

Indiana Department of Revenue announced county income tax rate changes, effective October 1, 2021

The Indiana Department of Revenue (DOR) released Departmental Notice #1, How to Compute Withholding for State and County Income Tax, reflecting changes in local income tax rates that are effective October 1, 2021. (News release, 09-28-2021.)

Local income tax rates are determined by county officials and provided to the DOR for review and release.

The following local income tax rates are revised, effective October 1, 2021:

  • Owen County: the rate increased to 0.025, up from 0.016
  • Warrick County: the rate increased to 0.01, up from 0.005

For individuals who are Indiana residents as of January 1, 2021, county tax rates are based on the employee’s Indiana county of residence on that date. For individuals who are not Indiana residents on January 1, 2021, county tax rates are based on the individual’s county of principal business or employment.

A complete list of current rates for all Indiana counties is available on the DOR’s website in Departmental Notice #1.

Additional tax rate changes effective January 1, 2022 may be announced.

State income tax rate remains at 3.23%

The state individual income tax rate was reduced from 3.4% to 3.3% effective for calendar years 2015 and 2016 and was further reduced to 3.23% for 2017 and later years.(HB 1001, PL 205, signed by the governor on May 8, 2013.)

Other legislation enacted in 2015 required that local income taxes collected by Indiana counties be consolidated into one local income tax rate per county. The law also required that both residents and nonresidents living and/or working in a county pay at one local income tax rate, increasing the local taxes paid by nonresidents. For more information, see Department Notice #42. (HB 1485, PL 243, signed by the governor on June 5, 2015.)

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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