Corporate Income Tax
Indiana’s Corporate Adjusted Gross Income Tax is calculated as a flat percentage of the company’s adjusted gross income attributable to the company’s Indiana sales. To determine Indiana’s share of an interstate or international corporation’s taxable income, a company’s adjusted gross income is apportioned based upon a single-sales factor with Indiana’s portion based solely on the portion of the company’s sales in Indiana. Adjusted gross income is a company’s federal adjusted gross income with certain adjustments. This method of determination simplifies tax calculations for corporations and does not apply to S corporations and not-for-profit organizations.
Corporate Tax Rates
The current corporate tax rate is 6 percent. Indiana’s applied Corporate Income Tax rate is being cut from 8 percent to 4.9 percent by July 2021 through 0.5 percent per year reductions that began in July 2012.
Single Sales Factor
Since 2011, Indiana has used the single-sales factor for apportioning corporate income tax. The single sales factor calculates the Indiana portion based solely on the portion of a company’s sales in Indiana.
Sales & Use Tax
Indiana’s Sales and Use Tax is calculated at a rate of 7 percent. In manufacturing, the following are exempt from the sales tax: raw materials, equipment, and utilities. Wholesale sales, items used directly in production, and sales made in interstate commerce are exempt. In addition, the purchase of research and development equipment is exempt from the tax.
Property Tax
Real and personal property tax is assessed at 100 percent of market value. Tax rates and exemptions vary among local jurisdictions. Pursuant to state law, homeowner property taxes are capped at 1 percent of a home’s assessed value, apartments and agriculture land are capped at 2 percent of assessed value, and business property taxes are capped at 3 percent of assessed value.
Inventory Tax
Indiana has no gross receipts tax and no inventory tax.
Local Income Tax
Muncie-Delaware County does have a modest local income tax amounting to 1.5 percent. This pertains to employee wages and is not a tax on corporations.
Individual Income Tax
Indiana’s personal income tax is 3.23 percent of federal adjusted gross income (with certain exemptions and deductions).
Patent Income Exemption
Taxpayers are exempt from certain income derived from qualified utility and plant patents. Qualified taxpayers are eligible for an exemption of 50 percent of patent income for each of the first five years. The exemption percentage decreases over the next five years to 10 percent in the tenth year. The total amount of exemptions claimed by a taxpayer may not exceed $5 million per year. This benefit is available only to companies with 500 or fewer employees.