Indiana Payroll: Employer Tax and Software Guide

Indiana has one of the simplest state income taxes in the country and one of the most misunderstood local ones, and the second fact matters far more to an employer than the first. I build HR software for small businesses, and if an owner asked me which Indiana rule to get right first, I would say the county tax.

This guide covers what Indiana requires, what changed for 2026, and how 10 payroll providers price the work. The state rate is the easy part: a flat 2.90 percent from January 1, 2027 (2.95 percent in 2026), the latest step in cuts that began in 2023.

The hard part sits underneath the state rate: a county income tax levied by every single one of Indiana's 92 counties, with no exceptions. It is keyed not to where the employee works but to where they lived on January 1 of the tax year.

That January 1 snapshot is what makes Indiana payroll distinctive. An employee who moves counties in March keeps their old county rate until the following January. A commuter who lives in Marion County and works in Hamilton has Marion tax withheld. And a paycheck calculator that skips the county line will understate what comes off the check.

What Indiana requires from employers

A flat rate that keeps falling

Indiana taxes income at a single flat rate and has cut it each January since 2023. The Department of Revenue sets 2.90 percent from January 1, 2027, after 2.95 percent for 2026.

Because the rate has changed every January since 2023, a platform still running last year's figure over-withholds by a small amount that nobody notices until filing.

Indiana does not use a standard deduction. For withholding, the base is reduced by $1,000 per personal exemption and $1,500 per qualifying dependent before the rate applies. Bonuses and other one-time payments are withheld at the same flat rate, computed without exemptions.

Unemployment insurance

Unemployment insurance (UI) in Indiana is paid by the employer alone. The Department of Workforce Development (DWD) publishes premium rates against a fixed wage base, with four reference points worth knowing.

Premiums are calculated on the first $9,500 of gross wages per employee per calendar year, a base that has been stable for over a decade. Most new employers hold the 2.50 percent rate for their first four calendar years rather than three, with rates determined as of June 30 each year for the following calendar year.

Construction companies, government entities, and successor employers are assigned differently: construction pays the lesser of 4.0 percent or the industry average, government entities pay 1.6 percent unless they elect to reimburse, and a successor inherits the predecessor rate.

Quarterly wage reports and premium payments are due April 30, July 31, October 31, and January 31.

The county tax and the January 1 rule

This is the part of Indiana payroll that has no close equivalent anywhere else, and it is worth understanding precisely because the mechanism is counterintuitive.

Read the second row against the third. County tax follows the residence for anyone living in Indiana. The work location only enters the calculation when the employee lives outside the state entirely, and then the county of principal employment applies. Ohio municipal tax works the opposite way, following the worksite, so an employer with Ohio experience will get Indiana backwards on instinct.

Six counties raised their rates effective January 1, 2026: Carroll, Grant, Greene, Howard, Shelby, and Union. Boone County followed on October 1, 2026. Rates can change in January and October, so twice a year rather than annually, and the authoritative source is Departmental Notice Number 1 rather than any third-party table.

What comes off an Indiana paycheck

Four lines come off the employee side of an Indiana paycheck: federal income tax, Social Security and Medicare, the flat state rate, and the county rate. There is no state disability deduction and no paid family leave contribution, so the table below is the whole picture for a resident employee, employer-side premium included.

On a $2,000 semimonthly gross, before exemptions, the state line comes to $58.00 from January 1, 2027 ($59.00 in 2026). In Randolph County, at 3.00 percent, the county line adds $60.00. That is the arithmetic behind the calculator warning above: drop the county row there and the deduction total is understated by more than the state tax.

Form WH-4, filings, and reciprocity

Form WH-4

Form WH-4, State Form 48845, is the Employee's Withholding Exemption and County Status Certificate. Every Indiana employee completes it in addition to the federal W-4, and its second function is what makes it load-bearing: it is where the employee declares their county of residence and county of principal employment as of January 1.

The current version, revised in August 2023, carries a one-time Line 7 exemption for a child claimed for the first time and a checkbox for county changes that take effect the next calendar year.

Employers keep completed forms on file rather than submitting them to the Department of Revenue, which means the county assignments in your payroll system are only as good as the forms in your records.

Filings and deadlines

Employers file the WH-1 through INTIME, the Department of Revenue's online portal, and the return carries a county breakdown, so the county assignment flows through to the return, not just the paycheck. A late WH-1 carries a penalty of up to 20 percent with a $5 minimum, and a late WH-3 costs $10 per document.

Reciprocity covers the state layer only

Indiana has reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin, documented on Form WH-47. A resident of any of those five working in Indiana is exempt from Indiana state income tax withholding.

Wage rules and pay timing

Indiana's minimum wage has matched the federal $7.25 since July 2009 and the state preempts local wage ordinances, so there is no city-level variation to track. Overtime follows the federal Fair Labor Standards Act standard, and Indiana's own wage law repeats it: time and a half after 40 hours in a workweek, with no daily overtime.

Pay timing is where Indiana adds rules of its own. The semimonthly minimum frequency rules out monthly payroll, and the ten-business-day rule limits how long you can hold pay after a period closes. Final wages are due on the next regular payday regardless of how employment ended.

Accrued vacation counts as compensation in the view of the Indiana Department of Labor, so a departing employee may be owed a pro rata share unless your written policy sets conditions for payout.

New hires are reported to the Indiana New Hire Reporting Center within 20 days, with a penalty of $25 per employee rising to $500 where employer and employee conspire to avoid reporting.

10 payroll providers for Indiana employers compared

Every provider below files Indiana state withholding and unemployment premiums. The differentiator here is narrower and more specific than in most states: how the platform handles county assignment, and in particular whether it applies the January 1 rule correctly rather than switching the county every time an address changes.

OnPay

OnPay sells one plan at $49 per month plus $6 per employee, with no tiers to climb. Federal, state, and local tax filing sits in that base plan rather than behind an upgrade, while HR tools and time tracking are paid add-ons.

OnPay also publishes an Indiana payroll tax and registration guide listing the WH-1 and WH-3 filings it handles, a reasonable signal that it keeps state and county tables current.

Gusto

Gusto pairs automatic tax filing and published pricing with onboarding built into the same account. Simple runs $49 per month plus $6 per employee after a base increase during 2025. According to its help center, Gusto works out Indiana county tax from each employee's address as of January 1 and keeps that county for the rest of the year after a move.

The single-state limit on Simple matters here because three of Indiana's four neighbors (Kentucky, Michigan, and Ohio) have reciprocity agreements with it, so cross-border employment is routine. One such hire moves you to Plus at $80 plus $12 per employee.

Patriot Software

Patriot has the cheapest full-service plan in this comparison at every headcount modeled. Full Service is $37 per month plus $5 per employee and includes federal, state, and local tax filing; new hire reports remain yours to file. Basic is $17 plus $4 if you file taxes yourself, which in Indiana means handling WH-1, WH-3, and the quarterly unemployment reports by hand.

Square Payroll

Square's full-service plan runs $35 per month plus $6 per person paid, and in Indiana it files the WH-1, which carries the county tax, along with the WH-3 and new hire reports. For an Indianapolis or Fort Wayne restaurant already running Square point of sale, timecard data flows straight into payroll with no integration work.

SurePayroll

SurePayroll is owned by Paychex and built for very small employers and household employers. Its small business plan is $29 per month plus $7 per employee, with a flat $9.99 monthly multi-state fee rather than a per-state charge, which suits an Indiana employer with staff across one of the three reciprocity borders. A separate fee applies in areas that require local taxes.

QuickBooks Workforce Payroll

QuickBooks Payroll Core became Workforce Payroll in a 2026 rename and runs $50 per month plus $7 per employee after the per-employee increase of July 1, 2026. The argument for it is unchanged: if your books live in QuickBooks Online, payroll reaches the general ledger without an export.

ADP RUN

Every ADP RUN package takes payroll taxes from calculation through deposit, filing, and reconciliation, and if ADP makes a filing error, it pays the fines that result. Indiana is a state where that service converts into value: 92 county rates that can move twice a year, a residence-based assignment rule, and a reciprocity carve-out that applies to one layer but not the other.

The cost is opacity. ADP publishes no rates for its Essential, Enhanced, Complete, or HR Pro packages, so every price starts with a quote. There is no contract to sign, and ADP says service can be ended at any time.

Paychex Flex

Paychex competes on service rather than software. It sells four payroll packages (Basic, Foundations, Advanced, and Complete) and publishes no rates for any of them; a payroll specialist comes with Complete and is an add-on below it. In Indiana the service model earns its keep when a county assignment question arises or a WH-1 does not reconcile.

Paylocity

Paylocity sits between small-business payroll and full human capital management software, aimed at companies that have outgrown basic payroll. Its clients average more than 150 employees, according to its 2026 annual report. It publishes state-by-state payroll tax guides, and its HR suite covers performance, learning, and engagement alongside payroll. Pricing is quote-based and implementation is a project rather than a signup.

Rippling

Rippling unifies payroll, HR, and IT provisioning on one employee record. Its pricing page lists no rates, but its small-business page says its plans start at $8 per user per month for payroll, plus a $40 monthly base fee. Its blog prices the core platform at $8 per employee and domestic payroll at another $8 on annual billing, so a configured quote runs above that start.

Rippling's blog also estimates $15 to $25 per employee per month for a 100-person company running HR, payroll, benefits, and time tracking.

What each provider actually costs an Indiana employer

The table below models published rates at three headcounts. Indiana is one of the states where these figures approximate the whole software cost, since there is no disability carrier, no paid leave remittance, and no employer-side local tax.

Patriot is the cheapest published option at every headcount, with Square next. Gusto Simple is competitive until a hire across one of the three reciprocity borders forces the Plus tier, taking a 25-person payroll from $199 to $380 per month.

Choosing a payroll provider for Indiana

Before you choose

FirstHR is an onboarding and HR platform, not a payroll provider. Payroll, payroll tax filing, and benefits administration come from the providers above, and in a state where county assignment drives the withholding, choosing one that handles it correctly is the most consequential decision on this page.

What we handle is the paperwork layer that feeds payroll. Form WH-4, Form I-9, and the federal W-4 go on each new hire's first-day task list, and completed forms are kept in the employee file; the forms themselves are completed outside the platform.

Offer letters and acknowledgments go out for e-signature, and employee records and document management come at a flat $98 a month for up to 10 people or $198 for 11 to 50.

Two of the Indiana requirements above are record problems rather than payroll problems: collecting a WH-4 with an accurate county declaration before the first payroll run, and filing the new hire report within twenty days. A task with a deadline in an onboarding workflow can carry both.

Frequently Asked Questions

What are the Indiana payroll taxes an employer has to handle?

Three plus federal: state income tax withholding at a flat 2.90 percent from January 1, 2027 (2.95 percent in 2026), county income tax withheld on top at rates set by each of the 92 counties, and unemployment insurance on the first $9,500 of wages at 2.50 percent for new employers. There is no state disability program and no paid family leave contribution.

What is the Indiana income tax rate?

A flat 2.90 percent from January 1, 2027 (2.95 percent in 2026), per the Department of Revenue. Bonuses and other one-time payments are withheld at the same rate without exemptions. Indiana has no standard deduction; withholding reduces the base by $1,000 per personal exemption plus $1,500 per dependent.

Do all Indiana counties have an income tax?

Yes, all 92 with no exceptions, applying to the county's residents and to people who live outside Indiana but work principally in the county. Each county has one rate that applies identically to both groups. Rates are published in Departmental Notice Number 1 and can change in January and October; six counties raised rates effective January 1, 2026.

Is Indiana county tax based on where an employee lives or works?

Where they lived on January 1 of the tax year. An employee living in Marion County and working in Hamilton County has Marion County tax withheld. The work county applies only when the employee lives outside Indiana entirely. Because the determination is a January 1 snapshot, a mid-year move does not change the rate until the following January.

What is Form WH-4 and why do Indiana employees need it?

State Form 48845, the Employee's Withholding Exemption and County Status Certificate, required alongside the federal W-4. It is where the employee declares county of residence and county of principal employment as of January 1, information the federal form does not collect.

The current version, revised in August 2023, has a one-time exemption for a child claimed for the first time and a checkbox for county changes. Employers keep the form on file rather than submitting it.

What is the Indiana unemployment insurance wage base and rate?

Premiums apply to the first $9,500 of gross wages per employee per year. The published reference points are 0.50 percent minimum at $47.50 per employee, 2.50 percent for typical new employers at $237.50, 7.40 percent maximum in good standing at $703.00, and 9.40 percent delinquent at $893.00. Most new employers hold 2.50 percent for their first four calendar years.

What is the minimum wage in Indiana?

$7.25, matching the federal rate and unchanged since July 2009, with a tipped cash wage of $2.13 and a training wage of $4.25 for employees under 20 during their first 90 days. Indiana preempts local wage ordinances, so no city or county sets a different rate.

How often must Indiana employers pay employees?

At least semimonthly, with biweekly available on employee request under Indiana Code 22-2-5-1(a). Monthly payroll is not permitted, and pay for a period is due within ten business days after it ends. Final wages are due on the next regular payday whether the employee resigned or was terminated.

Which states have tax reciprocity with Indiana?

Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin, via Form WH-47. Residents of those five working in Indiana are exempt from Indiana state income tax withholding. Reciprocity does not extend to county tax, so a nonresident whose principal employment is in an Indiana county still owes that county's tax.