There’s more than corn in Indiana! What is Indiana know for? Farmland would be the top on my list for being one of the leaders in producing corn and soybeans, as well as being the “Crossroads of America” which is the state’s motto. The great state of Indiana is also home to the incredible Indiana Dunes, some outstanding universities (Norte Dame, Purdue, Indiana University, etc), the Indy 500, and we could not forget about the steel mills. But one thing that most Hoosiers and non-Hoosiers alike do not consider is that Indiana treats its retirees pretty well when it comes to income taxes!
There are 8 states with no state income taxes, the most well-known including Florida, Nevada, and Texas, but there are other states around the country that do their best to attract retirees by offering other tax benefits. Indiana being one such state by not including Social Security benefits as taxable income for state income tax.
Indiana has done a great job over the last several years operating under a fiscally responsible budget and thus has allowed it to maintain lower than average taxes. When comparing Indiana against the other states that do have income taxes, for a married couple with $50,000 a year in taxable income Indiana is the 3rd lowest only behind Washington & North Dakota at the state level.
While Hoosiers do benefit from a lower-than-average state income tax to retire into, it’s also important to consider what county you live in. All of the 92 Indiana counties have Local Income tax, and they range from our very own Porter County at the low end of 0.5% all the way up to Randolph County at 3.0%. Consider that the same couple with a taxable income of $50,000 pays $1,500 in local tax to live in Winchester, IN in Randolph County but would only pay $250 in local tax to live in Valparaiso, IN in Porter County! That’s a $1,250 difference!
Lastly, when most retirees are hurting from inflation and difficult market environments, they want to know what their government has done for them lately. In March 2022, Indiana lawmakers signed into law a plan for Indiana state income tax rates to decrease over the next 7 years. In 2022 Indiana state income tax was 3.23%. That amount has decreased to 3.15% for 2023 & 2024. Most folks don’t even know they are paying a lower tax rate today!
After 2024, if Indiana state revenue and the Pension Stabilization Fund maintain certain obligations then Hoosiers will see rates reduced to 3.1% in 2025 & 2026, 3.0% for 2027 & 2028, and lastly 2.9% in 2029.
To learn more or to discuss your investment needs. Please reach out to us at 219-465-6924 or through the Contact Us page on our website.
Mark Rosinski, CFP®, CPA