What if?
The same sale under different choices, each computed by the engine rather than estimated. Figures are the tax on the gain, so the rows stay comparable when a variant spans two tax years. Select one to load it into the calculator and read its full derivation.
Estimates only — this is not tax advice. Consult a CPA or enrolled agent before acting on these figures. The calculator does not model the alternative minimum tax, wash sales, like-kind exchanges, QSBS, installment sales, or state additions and subtractions. See what is out of scope.
Show your work — 0 steps, each with its rule and citation
How Indiana taxes a capital gain
Statutory authority: Indiana Department of Revenue, Rates, Fees & Penalties (retrieved 2 September 2026)
The state rate is only part of an Indiana bill
Indiana has one of the lowest state income tax rates in the country, and quoting it alone gives a misleading impression of what an Indiana taxpayer actually pays. Every one of the state’s 92 counties levies its own income tax in addition, and those county taxes reach capital gains for residents exactly as they reach wages.
County rates vary widely and are set locally, so there is no single number to add. The Department publishes them in Departmental Notice #1, and — unusually — they may be adjusted twice a year, in January and again in October. A rate that was correct for your county in the spring is not guaranteed to be correct in the autumn.
This calculator computes the state layer only. For an Indiana resident the figure here is incomplete rather than approximate, and the county rate should be added to it. That is disclosed plainly for the same reason Ohio’s municipal taxes are: an omission the reader does not know about is indistinguishable from an error.
A scheduled reduction, with the next step already fixed
Indiana has been stepping its rate down for several years, and unlike states whose reductions depend on revenue conditions being met, the next step is already set. The Department states both figures in one sentence: the rate for 2026 is 2.95% and will adjust in 2027 to 2.90%.
That certainty is worth something when planning a sale. In a trigger state, deferring a disposal into next year to catch a lower rate is a bet on a determination that has not been made. In Indiana the 2027 figure is published in advance, so the five-basis-point difference is a known quantity rather than a hope — though on any realistic gain it is small against the federal consequences of moving the sale.
No preferential rate, and no holding-period distinction
Indiana taxes capital gains as ordinary income at the flat rate. There is no state equivalent of the federal 0/15/20% ladder, no exclusion for long-held assets and no reduction for having held an asset beyond a year. The whole of the holding-period benefit is federal.
The flat structure has one practical advantage: because the rate does not vary with income, the state figure is a simple proportion of the gain. A large sale and a small one attract the same percentage, and there is no bracket for a gain to straddle.
Finding the county rate this calculator leaves out
Because the county layer can rival the state layer in size, an Indiana taxpayer who stops at the figure on this page is looking at perhaps two thirds of the answer. The rate you need is the one for the county you were resident in on 1 January of the tax year, not the county where the asset was, and not where you live when you file.
The Department publishes the full chart in Departmental Notice #1, and the current IT-40 instruction booklet carries the same figures for individual filers. Both are linked from the Department page cited at the foot of this page. Rates run from well under 1% to over 3% depending on the county, so the range genuinely matters rather than being a rounding question.
Watch the January and October adjustment dates if you are checking mid-year. A county rate can move twice within a single tax year, and a chart pulled in February may not be the one that governs a December sale.
How Indiana compares with its neighbours once county tax is added
Indiana’s 2.95% is among the lowest state rates in the country, and the comparison with its neighbours changes shape once the county layer is included.
On the state figure alone Indiana sits below Michigan at 4.25% and Illinois at 4.95%, and just above Ohio at 2.75%. Add a mid-range Indiana county rate of around 1.5% and the combined figure lands close to Michigan’s and above Ohio’s state rate — though Ohio has municipal income taxes of its own that this calculator also does not compute.
The general point is that headline state rates are a poor guide in exactly the states where local income taxes are common. Indiana, Ohio, Michigan, Maryland, New York and Pennsylvania all have layers beneath the state one, and comparing their state rates alone compares the wrong thing.
What Indiana does not change
Your federal position is unaffected by living in Indiana. The long-term rates, the 3.8% net investment income tax, the Section 121 home-sale exclusion and Section 1250 depreciation recapture apply exactly as they would anywhere else.
The state figure here stacks your gain on federal ordinary taxable income. Indiana starts from federal adjusted gross income and applies its own add-backs, deductions and exemptions, none of which are modelled here. Combined with the missing county layer, an Indiana result should be read as the state component of a larger bill rather than the bill itself.
A worked Indiana example
Every figure below is computed by the same engine that powers the calculator above, at the moment this page was built — not typed in by hand. When the tax-year data is updated, this example updates with it.
A $120,000 gain on an $80,000 salary
A single filer in Indiana earning $80,000 sells long-held shares for a $120,000 gain. The state layer below excludes county tax, which applies on top.
- Taxable income after deduction
- $183,900
- Taxable gain
- $120,000
- Tax owed without the sale
- $8,770
- Tax the sale added
- $18,000
- Total federal tax
- $26,770
- Indiana state tax
- $3,540
- Effective rate on the gain
- 15%
The state charge is 2.95% of the gain. A county rate of 1.5% — around the middle of the Indiana range — would add roughly half as much again on top of it, which is why the county layer is worth looking up rather than ignoring.
Caveats on this example (2)
- Net investment income was derived from capital gains and qualified dividends only. Interest, non-qualified dividends, rents, royalties and passive business income inside ordinaryIncome are also net investment income under IRC 1411(c) and are not counted here.
- Indiana: local income taxes are not modelled and apply on top of the state figure. Every Indiana county levies its own income tax on top of the state rate, and county rates may be adjusted in January and October. They are published in DOR Departmental Notice #1 and are NOT computed here, so an Indiana figure is the state layer only.
Show the working — 13 steps, each with its citation
- Net short-term capital gain or loss for the year$0
Assets held one year or less. Taxed at ordinary rates if a net gain.
- Net long-term capital gain or loss for the year$120,000
Assets held more than one year. Eligible for the 0/15/20% rates.
- Standard deduction-$16,100
Adjusted gross income of $200,000 less $16,100.
- Taxable income$183,900
The figure the rate tables and the capital gain ceilings are both measured against.
- Ordinary income taxed at 10%$1,240
$12,400 of taxable income between $0 and $12,400.
- Ordinary income taxed at 12%$4,560
$38,000 of taxable income between $12,400 and $50,400.
- Ordinary income taxed at 22%$2,970
$13,500 of taxable income between $50,400 and $63,900.
- Ordinary income stacked below the long-term gain$63,900
Long-term gain is taxed by reference to where it sits ON TOP of $63,900 of other taxable income, not from the bottom of the rate table.
- Long-term gain taxed at 15%$18,000
Gain between the $49,450 zero-rate ceiling and the $545,500 15% ceiling.
- Net investment income tax threshold$200,000
Modified AGI of $200,000 against the $200,000 threshold for a single filer. This threshold is statutory and is not adjusted for inflation.
- Net investment income tax does not apply$0
Modified AGI is $0 below the threshold.
- Indiana income tax at 2.95%$3,540
Flat 2.95%, taxing capital gains as ordinary income. The Department states it directly: "The Indiana Individual adjusted gross income tax rate for 2026 is 2.95% and will adjust in 2027 to 2.90%." FOR THE 2027 ROLL-FORWARD: the rate becomes 2.90%, on the same page. The statute could not be used as the source — iga.in.gov serves the code through a client-side application that redirects every deep link to its homepage, so IC 6-3-2-1 is unreachable to automated retrieval and the Department page is the primary source.
- Total tax$30,310
$30,310 on $200,000 of total income, an effective rate of 15.16%.
What this calculator does not cover for Indiana
The Indiana figure stacks your gain on your federal ordinary taxable income. Indiana computes its own taxable income with its own additions and subtractions, which are not modelled here — so treat the state number as a close approximation for a straightforward wage-and-sale situation, and as a rough one if your return carries significant state adjustments.
Full-year residency is assumed throughout. Part-year residents, non-residents, and gains sourced to property in another state all turn on rules this calculator does not model. The complete list of what is in and out of scope is on the methodology page.
Other states
- OhioA single 2.75% rate from 2026, above an indexed floor.
- IllinoisFlat 4.95% on everything. No preferential rate, no exclusion.
- MichiganFlat 4.25%, but the statute sets a trigger rather than a rate.
See the full 2026 capital gains guide for the federal rules that apply wherever you live — the rate ladder, the net investment income tax, the home-sale exclusion and depreciation recapture — plus every state we currently cover.