State Residency Guide
Indiana Residency
Indiana's state flat rate is 2.95% for 2026, down from 3.00% in 2025 under a legislated phase-down schedule that continues to 2.90% in 2027 with further revenue-triggered cuts possible starting in 2030. On top of the state rate, all 92 Indiana counties levy an additional local income tax ranging roughly from 0.5% to 3.38%, so the real combined marginal rate depends heavily on county of residence.
Top Income Tax Rate
2.95% (flat, state) + county income tax
Audit Aggressiveness
Moderate (2/5)
Residency Tests
Statutory Residency Test
Indiana Code 6-3-1-12 and 45 IAC 3.1-1-21 define a resident two independent ways: an individual domiciled in Indiana during the tax year, or an individual who is not domiciled in Indiana but maintains a permanent place of residence in the state and spends more than 183 days of the taxable year in Indiana. Indiana guidance explicitly notes the 183-day/permanent-residence test is a separate, independent basis for residency, not itself a test for domicile.
Domicile Test
Under 45 IAC 3.1-1-22.5, Indiana presumes a person has not abandoned Indiana domicile if they maintained a permanent residence in Indiana and satisfy at least one of: claiming a homestead deduction or military tax exemption on an Indiana home, voting in Indiana, occupying an Indiana residence more days of the year than any other single state, claiming a federal tax benefit based on Indiana being the principal residence, or having a place of employment or business in Indiana. Supplementary factors include driver's license and vehicle registration location, dependent claims, mailing address, bank accounts, organizational memberships, and where professional services and valuables are located.
Day Count Threshold
183 days
Any Part of a Day Rule
Indiana's statute uses 'more than 183 days,' which mirrors New York's and Illinois's phrasing; Indiana guidance does not publish a specific carve-out exempting partial days, and practitioners treat any day with meaningful Indiana presence as counting toward the total absent a documented exception like medical treatment or transit.
Presumptions
45 IAC 3.1-1-22.5 creates a presumption against abandonment of Indiana domicile whenever a person kept a permanent Indiana residence and meets at least one of the five primary factors listed above (homestead claim, voting, most-days-in-state, federal filing benefit, or Indiana employment); this presumption is rebuttable but places real weight on continuing to hold any one of those Indiana connections.
Leaving Indiana
Indiana is not generally characterized by practitioners as an aggressive residency-audit state compared with its neighbors; its flat, comparatively low income tax rate reduces the dollar incentive for the Department of Revenue to pursue contested domicile cases the way high-rate states do. The Department does issue individual Letters of Findings resolving residency disputes, including cases finding a taxpayer was not subject to Indiana tax because they had established domicile in another state based on objective evidence like a home purchase and filings there, showing Indiana does examine claims on a case-by-case basis rather than running the kind of broad, headline exit-audit programs seen in New York or Minnesota.
Trailing Income
Indiana has no convenience-of-the-employer rule, so a former resident who works remotely from another state for an Indiana-based employer is generally not taxed by Indiana on those wages once genuinely nonresident, since Indiana sources employee compensation to where the work is physically performed. Indiana does continue to tax Indiana-source income after departure, including gain on Indiana real property and a departing resident's share of Indiana business income for the period they operated in the state.
Part-Year Filing
Form IT-40PNR, Indiana Part-Year and Full-Year Nonresident Individual Income Tax Return, is used for the year a taxpayer moves into or out of Indiana. It allocates income between the Indiana-resident portion of the year and the nonresident portion, and also handles the county income tax allocation based on county of residence or principal work location as of January 1 or as of the move date, depending on the specific county tax rule that applies.
Enforcement Methods
Common Exit Mistakes
Establishing Indiana Residency
| Action | Agency | Deadline |
|---|---|---|
| Transfer driver's license and register any vehicle kept in Indiana | Indiana Bureau of Motor Vehicles | within 60 days of establishing residency |
| Register to vote | Indiana Election Division | 29 days before Election Day for online, mail, and in-person registration |
| File Form HC10 for the Homestead Standard Deduction on a purchased primary residence | County Auditor | on or before January 1 of the assessment year for that year's deduction, or as part of the sales disclosure at closing |
Declaration of Domicile
Indiana has no county-level declaration-of-domicile filing like Florida. Domicile is established through the conduct listed in 45 IAC 3.1-1-22.5: buying or leasing a home, registering to vote, obtaining the Indiana license and plates, claiming the homestead deduction, and shifting where employment and business activity actually occur.
Homestead
The Homestead Standard Deduction reduces assessed value by the lesser of $48,000 or 60% of assessed value on an owner-occupied principal residence, with an additional supplemental deduction on the remaining assessed value. Because Indiana law specifically directs the Department of Local Government Finance and county auditors to develop procedures to catch homestead claimants whose actual principal residence is outside Indiana, claiming or removing this deduction is a real, checkable data point for anyone establishing or leaving Indiana domicile.
Voter Registration
Register online, by mail, or in person at least 29 days before Election Day; Indiana does not offer same-day registration. https://indianavoters.in.gov
Vehicle Registration Deadline
60 days
New Resident Tax Traps
A new full-year Indiana resident is taxed on worldwide income from the date Indiana residency begins, reported on Form IT-40PNR for the split year, which also requires sorting out the county income tax based on county of residence. New residents should identify their county's local tax rate promptly, since it stacks on top of the 2.95% state rate and varies substantially, from roughly 0.5% in some counties to over 3% in others.
Tax Profile
Capital Gains
No preferential rate. Capital gains are taxed as ordinary income at the flat state rate plus the applicable county rate.
Retirement Income
Social Security benefits are fully exempt from Indiana state and county tax. Pension, 401(k), and IRA distributions are taxed as ordinary income at the flat state rate plus county rate, with no broad age-based exclusion comparable to Michigan's or Illinois's, though Indiana offers a modest deduction for certain military and railroad retirement income.
Estate or Inheritance Tax
Indiana has no state estate tax and no inheritance tax; Indiana repealed its inheritance tax effective 2013. Only the federal estate tax, with its roughly $15 million per-person exemption in 2026, can apply to an Indiana decedent's estate.
Property Tax
Indiana's average effective property tax rate is around 0.8% of home value, among the lower rates in the Midwest. The Homestead Standard Deduction reduces assessed value by the lesser of $48,000 or 60% of assessed value for an owner-occupied principal residence, with an additional supplemental deduction on the remaining value; county auditors are directed to develop procedures specifically to catch owners whose actual principal residence is outside Indiana.
Sales Tax
Indiana has a flat statewide 7% sales tax, sometimes called the Gross Retail Tax, with no additional local sales tax layered on top anywhere in the state.
Community Property
Indiana uses common law, equitable-distribution marital property rules.
Wage-withholding reciprocity: Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin.
Special Situations
Travel Nurses
Indiana applies its ordinary domicile and 183-day/permanent-residence tests to a travel nurse the same as anyone else: a nurse not domiciled in Indiana who keeps a permanent Indiana residence and is present more than 183 days becomes an Indiana resident on worldwide income for that year, plus the applicable county tax. The more frequent exposure runs the other way, where a nurse claims a Florida or Texas tax home while actually renting in Indiana for most of an assignment; Indiana taxes nonresident wages for days actually worked in the state regardless of the claimed tax home.
Professional Athletes
Indiana taxes nonresident professional athletes using the standard duty-day formula applied across nearly all income-tax states: total season compensation multiplied by the ratio of Indiana duty days (games, practices, and mandatory team functions in the state) to total duty days for the season. This applies to visiting NFL and NBA teams playing the Colts and Pacers in Indianapolis, and Indiana's flat, comparatively low rate means the dollar amount at stake per game is smaller than in higher-rate states, though the filing obligation is the same.
Remote Workers
Indiana has no convenience-of-the-employer rule. A nonresident who works remotely from another state for an Indiana-based employer is generally not taxed by Indiana on those wages, since Indiana sources employee compensation to where the work is physically performed rather than to the employer's location.
Military
Indiana follows the federal Servicemembers Civil Relief Act and Military Spouses Residency Relief Act. A servicemember whose domicile was Indiana before entering service remains an Indiana domiciliary regardless of duty station unless they affirmatively establish a new domicile, while a servicemember stationed in Indiana on orders, and a qualifying spouse, does not become an Indiana resident solely because of the posting; Indiana also allows a deduction for certain military retirement income.
Students
A student's domicile generally follows their parents' while financially dependent, even while attending an Indiana university and living in a dorm or off-campus apartment during the school year. A financially independent student who takes affirmative steps under 45 IAC 3.1-1-22.5, registering to vote in Indiana, getting an Indiana license, and showing intent to remain after graduation, can establish independent Indiana domicile.
Snowbirds and Long Visitors
The Indiana snowbird risk runs through the same domicile-abandonment presumption that protects year-round Indiana residents: a retiree who keeps a permanent Indiana residence, continues to vote in Indiana, or keeps the homestead deduction active while wintering in Florida is presumed not to have abandoned Indiana domicile. Separately, spending more than 183 days in Indiana in a year while maintaining a permanent Indiana residence independently triggers Indiana residency regardless of domicile intent.
Airline Crew
Federal law (49 U.S.C. §40116) limits states to taxing airline employee compensation only in the employee's state of residence and any state where more than 50% of pay is earned, protecting flight crew based at Indianapolis International who are domiciled outside Indiana from full-income Indiana taxation based solely on their duty station.
Retirees
Indiana is genuinely competitive for retirees: a flat and falling state income tax rate (2.95% in 2026, trending toward 2.90%), full exemption of Social Security, no estate or inheritance tax, and a below-average effective property tax rate combine to make it one of the more retiree-friendly states in the Midwest, though the county income tax layer and lack of a broad pension exclusion mean the actual savings compared to a state like Illinois, which fully exempts retirement income, depend heavily on the retiree's income mix and county of residence.
Audit Profile
Statute of Limitations
Generally 3 years from the later of the return's due date (including extensions) or the date the return was filed, under IC 6-8.1-5-2 and 45 IAC 15-5-7. There is no limitations period for a fraudulent return or where no return was filed.
Typical Lookback
No published statewide figures exist on typical Indiana residency-audit lookback windows. The Department resolves individual residency disputes through published Letters of Findings on a case-by-case basis rather than running a widely publicized, high-volume exit-audit program, and practitioners generally describe Indiana as a lower residency-audit risk than its higher-tax neighbors given the smaller revenue at stake per contested case.
Defense Cost Range
No published statewide figures exist; because Indiana residency disputes are resolved primarily through administrative Letters of Findings rather than extended litigation, practitioners generally describe them as less costly to resolve than a contested multi-year audit in a higher-tax, more litigious state, but decline to publish a specific dollar range.
Indiana Residency FAQ
Does Indiana have a 183-day rule separate from domicile?+
Yes, and Indiana is explicit that the two are independent tests. Under IC 6-3-1-12 and 45 IAC 3.1-1-21, you're an Indiana resident if you're domiciled in Indiana, or separately, if you're not domiciled in Indiana but maintain a permanent Indiana residence and spend more than 183 days in the state during the year. Indiana's own guidance says the 183-day test is not itself a test for domicile, so you can fail one and still be caught by the other.
If I move to Florida but keep voting absentee or in person in Indiana, does that hurt my case?+
Yes, directly. Indiana's domicile-abandonment rule under 45 IAC 3.1-1-22.5 presumes you haven't given up Indiana domicile if you keep a permanent Indiana residence and continue voting in Indiana, among other listed factors. Re-registering to vote in your new state, and actually voting there, is one of the more concrete steps that supports a genuine domicile change.
Will keeping the homestead deduction on my Indiana house hurt me if I claim I moved to Florida?+
Yes. Indiana law specifically directs the Department of Local Government Finance and county auditors to develop procedures to identify homestead deduction claimants whose actual principal residence is outside Indiana, so continuing to claim it while filing as a nonresident elsewhere is exactly the kind of contradiction those procedures are built to catch. If you've genuinely moved, notifying your county auditor to remove the deduction is one of the concrete steps supporting your new domicile.
How does Indiana's county income tax work if I move counties or move out of state mid-year?+
On top of the flat 2.95% state rate, every Indiana county levies its own income tax, ranging roughly from 0.5% to over 3%, and your county rate generally depends on your county of residence. When you move into or out of Indiana mid-year, Form IT-40PNR handles both the state and county allocation for the split year, which makes Indiana's exit-year filing meaningfully more involved than a state with a single flat rate and no local layer.
I live in Kentucky and work in Indiana. Do I owe Indiana income tax on my wages?+
No, not on wages. Indiana has reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin, so a Kentucky resident's wages earned working in Indiana are taxed only by Kentucky, not Indiana, and Indiana withholding should not apply. Reciprocity covers wage income only; investment, rental, and business income from Indiana sources are still taxable by Indiana.
Does Indiana tax my Social Security or pension after I retire?+
Social Security is fully exempt from both Indiana state and county tax. Pension, 401(k), and IRA distributions are taxed as ordinary income at the flat state rate plus your county's local rate, since Indiana doesn't offer the kind of broad age-based retirement income exclusion that Illinois or Michigan provide, aside from a modest deduction for certain military and railroad retirement income.
Does Indiana have an estate tax I need to plan around?+
No. Indiana repealed its inheritance tax effective 2013 and has no state estate tax. The only estate-level exposure for an Indiana resident is the federal estate tax, which in 2026 exempts roughly the first $15 million per person.
Is Indiana an aggressive state for residency audits like New York or Minnesota?+
No, not by reputation. Indiana's comparatively low flat tax rate reduces the revenue at stake in a contested residency case, and the Department resolves individual disputes through published Letters of Findings on a case-by-case basis rather than running a large, publicized exit-audit program. That doesn't mean Indiana never scrutinizes a claim, one published finding involved a taxpayer who successfully showed he'd established Illinois domicile through objective evidence like a home purchase and filings there, but the overall enforcement posture is lower-intensity than its higher-tax Midwest neighbors.
How do I file my Indiana taxes for the year I move out of state?+
File Form IT-40PNR, the Part-Year and Full-Year Nonresident Individual Income Tax Return, which allocates income between your Indiana-resident period, taxed in full at the state and county rate, and the nonresident period, when only Indiana-source income is taxed. Because Indiana's county tax layer adds complexity most neighboring states don't have, it's worth double-checking the county allocation specifically in a move year.
What's the deadline to get an Indiana driver's license and register my car after moving here?+
New residents generally have 60 days from establishing residency to transfer an out-of-state driver's license and register their vehicles with the Indiana BMV; driving on out-of-state plates past that window is treated as a Class C infraction. Completing both promptly also helps document when your Indiana residency actually began if it's ever questioned later.
Indiana Reading
Reviewed Against 9 Primary Sources
ResidencyIQ organizes public residency research into a reviewable reference. It does not provide legal or tax advice. Consult a qualified professional before making a residency decision.
Start your record
Build your Indiana mobility map.
Start with a free map, document your center of life, then upgrade when you need evidence, advisor collaboration, and audit-ready reporting.
Create Free Mobility Map