Indiana
Reviewed July 2026Federal §453 conformity
Yes — Indiana starts from the federal return and taxes installment gain as payments arrive at a flat state rate of 2.95% for 2026, stepping to 2.9% under the enacted schedule. The number nobody quotes is the county's: all ninety-two counties levy their own income tax on the same base, commonly one to three percent, set by where the taxpayer lives each January 1. For a multi-year stream, the county rate is a live variable every year — a move across a county line changes the add-on for every payment after it.
Nonresident sourcing
Gain from Indiana real estate or a business operating in Indiana is Indiana income for sellers anywhere, and the payments keep that character; county tax applies to nonresidents based on their principal Indiana work or business county. Intangible gain generally follows the seller home.
Withholding
Indiana imposes no closing-table withholding on nonresident real estate sellers. Pass-throughs must cover nonresident owners through composite filing — Indiana makes composite mandatory rather than optional — unless the PTE election changes the math.
Selling, then moving (residency change)
Indiana-source gain stays taxable here after a move; other gain travels with the seller, and no rule accelerates deferred gain at the border. The cheap move is intrastate: the county rate resets every January 1, so even a same-state relocation changes the stream's tax.
Pass-through entity (PTE) tax election
Indiana's PTE election (2023, retroactive to 2022) taxes the entity at the state rate with owner credits, on annual terms. Note what it covers: the state tax, not the county add-on — model both layers before deciding.
Estate and IRD
Indiana has no estate or inheritance tax (the inheritance tax was repealed in 2013). At death the federal rules apply — heirs pay income tax as payments arrive — with no state layer.
Planning notes
Indiana's list is short and local: add the county rate to every projection and re-check it each January 1; remember composite filing is mandatory for nonresident owners; and size the PTE election against a state rate that's already among the lowest.
Indiana's real rate is the flat state rate plus the county's — one to three percent in much of the state — fixed by where the taxpayer lives each January 1. Over a long payment stream, county residence is a variable worth planning, and even an intrastate move changes the answer.
Educational information, current as of the July 2026 review. State law changes; confirm treatment with a qualified advisor before structuring a transaction.
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