Indiana Income Tax Rates & Brackets (Tax Year 2025 — Filed in 2026)

Remote Workers and Multi-State Taxation

Living in Indiana, Working for Out-of-State Employer

As an Indiana resident, you owe Indiana income tax on ALL income, regardless of where your employer is located.

What this means:

• Employer location does NOT determine tax obligation
• Income from employers in other states is fully taxable in Indiana
• State law requires Indiana residents to report worldwide income
• You must file Form IT-40 reporting all income

Example: An Indiana resident working remotely for a California company owes Indiana state income tax (3.0%) plus Indiana county income tax on all wages, even though the work is performed from an Indiana home office.

Tax treatment:

1. Report all income on Indiana return
2. If other state taxes the income, claim credit on Indiana return for taxes paid to other state
3. File non-resident return in other state if required

Source: https://forms.in.gov/Download.aspx?id=16915

Working in Indiana, Living in Another State

General rule: Non-residents who perform work physically in Indiana owe Indiana income tax on wages earned from Indiana sources.

Physical presence rule: Income is sourced to Indiana based on where work is physically performed, not where employer is located.

30-Day Safe Harbor Exception:

Non-resident employees who work in Indiana for 30 days or less during the calendar year are not subject to Indiana income tax on wages.

Requirements:

• Must track days worked in Indiana
• Applies to compensation received as an employee only
• Does not apply to business income, rental income, or other non-wage income

Does NOT apply to:

• Professional athletes
• Professional entertainers
• Public figures (receiving $300,000+ annually for services in Indiana)
• Individuals with Indiana-source income exceeding $100,000
• Individuals who have or had a business, trade, or profession conducted in Indiana

Employer withholding:

• Employers may rely on employee affidavit (Form WH-4AFF) stating employee will not exceed 30 days
• If 30-day threshold is exceeded mid-year, employer must withhold retroactively
• Days worked for previous Indiana employers count toward 30-day limit

Source: https://www.in.gov/dor/files/ib28.pdf

⚠️ Interstate Tax Risk Indicator

Remote workers involving Indiana commonly encounter dual taxation complications with specific states:

States requiring careful planning with Indiana:

High-risk states for Indiana residents working remotely:

• New York – Applies convenience of employer rule; may tax Indiana residents working for NY employers
• Pennsylvania – Complex local income tax system (67 municipalities); may require local tax payment
• Connecticut – May tax Indiana residents working for CT employers under certain circumstances
• Delaware – May assert nexus for Indiana residents working for DE employers

Indiana residents should be cautious when:

• Working remotely for employers in convenience-of-employer states
• Spending extended periods working from other states
• Maintaining property or residence in other states

Source: https://www.in.gov/dor/files/ib28.pdf and state-specific guidance

“Convenience of the Employer” Rule

Indiana does NOT apply a “convenience of the employer” rule.

Non-residents are taxed only on income from work physically performed in Indiana. If a non-resident works remotely from their home state for an Indiana employer, Indiana does not tax that income.

What this means:

• Living in Michigan and working remotely for an Indiana employer = No Indiana tax on wages (unless reciprocity applies)
• Indiana resident working remotely for New York employer = Indiana taxes all income, but New York may also tax under its convenience rule

Source: https://www.in.gov/dor/files/ib28.pdf

Reciprocal Agreements

Indiana has reciprocal agreements with five states:

• Kentucky
• Michigan
• Ohio
• Pennsylvania
• Wisconsin

What reciprocity means:

For wage income only:

• Indiana residents working in reciprocal states pay income tax only to Indiana (not to the work state)
• Residents of reciprocal states working in Indiana pay income tax only to their home state (not to Indiana)

Requirements:

1. Must be resident of one state and work in the reciprocal state
2. Applies to wages, salaries, tips, and commissions only
3. Must file exemption certificate (Form WH-47 or equivalent) with employer
4. State law requires proper withholding in state of residence

Does NOT apply to:

• Business income
• Rental income
• Investment income
• Gambling winnings
• Other non-wage income from the other state

County tax exception:

• Even with reciprocity from state tax, Indiana county tax may still apply to residents of reciprocal states working in Indiana
• Must file to claim credit for local taxes paid to localities in other states

Forms required:

• Indiana Form WH-47 – Certificate of Residence for Income Tax Withholding (for Indiana residents working in reciprocal states)
• Reciprocal state forms – Varies by state

Source: https://www.in.gov/dor/files/ib28.pdf

Reciprocity Details by State

Kentucky: Indiana residents working in Kentucky file Form 42A-809 (Kentucky Certificate of Nonresidence) with Kentucky employer.

Michigan: Indiana residents working in Michigan file Form MI-W4 claiming exemption with Michigan employer.

Ohio: Indiana residents working in Ohio file Form IT-4NR with Ohio employer.

Pennsylvania: Indiana residents working in Pennsylvania file Form REV-419 with Pennsylvania employer.

Wisconsin: Indiana residents working in Wisconsin file Form W-220 with Wisconsin employer.

Important: Must still file returns in both states:

• File resident return in home state reporting all income
• File non-resident return in work state showing reciprocal exemption
• Or file Form IT-40RNR (Indiana Reciprocal Nonresident form) if resident of reciprocal state

Source: https://www.in.gov/dor/files/ib28.pdf

Multi-State Tax Filing

When earning income in multiple states without reciprocity:

Step 1: File resident return in Indiana

• Form IT-40
• Report ALL income from all sources
• Calculate Indiana state and county tax

Step 2: File non-resident returns in other states

• Report only income from sources in those states
• Pay tax to those states on their-sourced income

Step 3: Claim credit on Indiana return

• Form IT-40, Schedule 3
• Credit for taxes paid to other states
• Prevents double taxation

Required documentation:

• Copy of other states’ returns
• Proof of tax payments to other states
• Schedule showing credit calculation

Source: https://forms.in.gov/Download.aspx?id=16915