Indiana LLC State Income Tax — 2.95% Flat Rate (2025+)

Indiana imposes a flat state income tax on LLC pass-through income at 2.95% (effective 2025). This rate has been declining per scheduled reductions enacted by the Indiana legislature. Your LLC income passes through to members who report it on their Indiana individual returns. For the full tax picture, see our Indiana LLC tax guide. For formation, see how to form an Indiana LLC.

Rate History and Trajectory

Indiana's legislature enacted scheduled reductions as the state's fiscal position improved. The 2.95% rate takes effect for tax year 2025 and beyond (unless further legislation changes it).

How It Applies to Indiana LLCs

Single-member LLC: Net income flows to Schedule C → then to Indiana Form IT-40. Taxed at 2.95%.

Multi-member LLC: LLC files Indiana Form IT-65. Each member receives Schedule IN K-1. Members report on IT-40 at 2.95%.

Don't forget county tax: The 2.95% state rate is NOT your total Indiana tax. Add your county rate (1%-3.38%) for the full picture.

Compared to Neighboring States

Indiana's 2.95% is the lowest flat rate among its neighbors (Illinois 4.95%, Michigan 4.25%, Kentucky 4.0%).

Filing Requirements

• Form IT-40 — Indiana individual income tax return (members report LLC income here)
• Form IT-65 — Indiana partnership return (multi-member LLCs file this)
• Form ES-40 — Quarterly estimated payments (if owing $1,000+)
• Due date: April 15 (same as federal)
• Portal: INtax/INTIME at intime.dor.in.gov

FAQ

Will Indiana's rate continue declining?

As of 2025, the scheduled reductions have reached 2.95%. Further reductions would require new legislation. No additional decreases are currently scheduled.

Do non-resident members owe Indiana income tax?

Yes, on their share of Indiana-source LLC income. Non-residents file Form IT-40PNR.

Is there a standard deduction for Indiana?

Yes. Indiana allows a $1,000 state standard deduction on the IT-40 (not substantial). Most deductions follow federal AGI as the starting point.