Monday, January 30, 2017

New Year, New Local Tax Rates for Indiana

PNN: Indiana Local Taxes

Effective January 1, 2017, the Indiana Department of Revenue (DOR) has issued Departmental Notice No. 1 with new state and county income tax rates. The state adjusted gross income tax rate has been reduced from 3.3% to 3.23% (this means that the supplemental wage tax rate is also reduced to 3.23%). The local income tax rate imposed by a county is the same for residents and nonresidents [DOR, Departmental Notice No. 1, How to Compute Withholding for State and County Income Tax, rev. 12-16, Press Release, 12-14-16].

From Three Taxes to One Local Income Tax
Previously, there were three types of county income tax in Indiana (CAGIT, COIT, and CEDIT). The reform legislation combined the three taxes into one local income tax. The new tax is being called the Local Income Tax and took effect on January 1.

New Departmental Notice No. 1
The new notice reminds employers that it is the first notice that lists one local income tax rate applicable to residents and nonresidents. It also lists the county code for each county (from 1 to 92). There are six counties that have income tax rate changes – Boone, Brown, Jackson, Jennings, Noble, and Tipton. Note: The DOR issued a correction to Departmental Notice No. 1 on December 15, 2016, to fix an error with the Jefferson County tax rate.

Read PayState Update to learn more about the changes to Indiana’s local income tax.