Indiana payroll taxes for employers (2026)
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A new Indiana employer pays unemployment tax at 2.5% on the first $9,500 of each worker's 2026 wages, set by the Indiana Department of Workforce Development (DWD), and Indiana does tax income, at a flat 2.95% state rate for 2026 (Department of Revenue Departmental Notice 1, checked October 2026). The part that trips up new employers is the county layer: every county levies an income tax, and you withhold it by where the employee lived on January 1, not where the job is.
- SUTA wage base
- $9,500
- New employer SUTA rate
- 2.5%
- State income tax
- Yes
- Minimum wage
- $7.25 (employers of 2 or more employees)
On this page
What is different about payroll in Indiana
Every Indiana paycheck carries two income taxes. The state piece is flat at 2.95%. The county piece runs from 0.5% in Porter County to 3.0% in Randolph County, and Marion County (Indianapolis) is 2.02% from January 1, 2026. The Department of Revenue publishes every county rate in Departmental Notice 1, updated each January 1 and sometimes on October 1.
The county is locked on January 1. A worker who moves counties in June stays on the January county until the next tax year. If the worker lived outside Indiana on January 1, you withhold for the county where they mainly worked on that date. Our page on Indiana county income tax withholding lists the rules in one place.
- Construction start rate: a new construction employer pays the lesser of 4.0% or the average rate for all construction employers, instead of 2.5%.
- Late filings raise your rate: DWD adds percentage points for missing or inadequate reports, and a delinquent employer's ceiling is 9.40% instead of 7.40%.
- No paid leave deduction: we found no state disability or family leave payroll program in Indiana.
- Workers comp with no headcount floor: IC 22-3-5-1(a) sets no employee minimum. Coverage comes from an authorized insurer or approved self-insurance; there is no state fund.
- Final pay: a discharged worker is paid on the regular payday for the period in which they left (IC 22-2-9-2). A worker who quits is paid on the next usual payday (IC 22-2-5-1).
Indiana employer payroll facts at a glance
| Item | Indiana rule or rate | Official source |
|---|---|---|
| SUTA taxable wage base (2026) | $9,500 | source; source; source |
| New employer SUTA rate | 2.5% | source; source; source |
| New employer rate, construction | Lesser of 4.0% or the average rate for all construction employers | |
| SUTA rate range | 0.50% to 7.40% (9.40% if delinquent) | |
| Surcharges and admin fees | Added percentage points for missing or inadequate reports; no separate surcharge listed | |
| 2027 rates published? | no | |
| Unemployment agency | Indiana Department of Workforce Development | source |
| State income tax withholding | Yes. Flat 2.95% state rate for 2026 (Departmental Notice 1, published Oct 1, 2025) plus county income tax by county of residence on Jan 1 | source |
| Paid leave or disability programs | none (no state program found) | |
| Minimum wage 2026 | $7.25 (employers of 2 or more employees) | source; source |
| Tipped cash wage 2026 | $2.13 | |
| Minimum wage 2027 | none announced | |
| New hire reporting | Within 20 days of the day the employee begins working | source |
| Pay frequency rule | Semi-monthly or bi-weekly (DOL payday table, rev. Jan 1, 2023; state page not confirmed) | |
| Final paycheck rule | Fired: regular payday for the pay period in which separation occurred (IC 22-2-9-2). Quit: next usual and regular payday; if the employer does not know the employee's address, 10 days after demand or once an address is given (IC 22-2-5-1) | source |
| Workers comp required | All employers must insure (no employee-count minimum stated in IC 22-3-5-1(a)), or prove financial ability to self-insure. Not monopolistic (benefits paid by employers through authorized insurers, not the state) | source ; source |
| Local income taxes | yes: county income taxes in all counties, withheld by county of residence (for example Marion County 2.02%) |
Checked October 16, 2026 against the official sources linked in each row.
How to register as an Indiana employer
- Get a federal EIN from the IRS. Every state account below asks for it.
- Open the INBiz registration checklist (inbiz.in.gov). It routes a new business to its state tax and unemployment accounts.
- Register for withholding with the Indiana Department of Revenue. State and county tax are remitted together on the state withholding return.
- Open your unemployment account with DWD. Expect the 2.5% rate (or the construction rate) on your first notice.
- Report each new hire within 20 days of the day they start work, through the state new hire portal (in-newhire.com).
- Bind a workers comp policy before the first shift.
What one employee costs in Indiana
For a $50,000 worker, Indiana's low $9,500 wage base keeps the state unemployment line small. Federal FICA is most of the bill.
| Line | How it is figured | Annual cost |
|---|---|---|
| Social Security | 6.2% x $50,000 | $3,100.00 |
| Medicare | 1.45% x $50,000 | $725.00 |
| FUTA | 0.6% x $7,000 | $42.00 |
| Indiana SUTA | 2.5% x $9,500 wage base | $237.50 |
| Total employer payroll tax | Sum of the lines above | $4,104.50 |
Source: IRS Publication 15 (2026) for FICA and FUTA; Indiana Department of Workforce Development for SUTA. Checked Oct 2026. State and county income tax are withheld from the employee and are not in this total.
A new construction employer would pay at most 4.0% x $9,500 = $380.00 in SUTA, for a total of up to $4,247.00. The 2.95% state tax and the county tax come out of the worker's pay, so they change take-home pay, not your cost. Compare the wage base with other states on the 2026 SUTA rate table.
Payroll services and PEOs for Indiana employers
The county code is where cheap setups fail. Before you sign, ask the provider how it assigns the county (it should use January 1 residence) and how fast it loads a new Departmental Notice 1. Border towns add a wrinkle: under Departmental Notice 1, a worker who lived in another state on January 1 is coded to the Indiana county where they mainly worked that day. We did not check how Indiana's agreements with neighboring states (for example for a Kentucky resident) change that, so ask the provider to show you its rule.
Compare monthly fees on our payroll software rankings. If you also want benefits and workers comp bundled, see the PEO comparison and what a PEO costs per employee.
Frequently asked questions
How much is payroll tax in Indiana for an employer?
Which county tax do I withhold for an Indiana employee?
What is the Indiana SUTA rate for a new employer in 2026?
Does Indiana have a paid family leave payroll tax?
When is a final paycheck due in Indiana?
Sources (10)
- Indiana Department of Workforce Development: Rate computation (checked Oct 16, 2026)
- Indiana Department of Workforce Development: New employer premium rate (checked Oct 16, 2026)
- Indiana Department of Revenue: Departmental Notice 1 (county tax rates) (checked Oct 16, 2026)
- State of Indiana: INBiz business registration checklist (checked Oct 16, 2026)
- Indiana Department of Child Services: New hire reporting (checked Oct 16, 2026)
- Justia (Indiana Code): IC 22-3-5-1 workers compensation insurance (checked Oct 16, 2026)
- HR Care (secondary, statute text): Indiana wage payment law (checked Oct 16, 2026)
- US Department of Labor: Significant provisions of state UI laws, July 2026 (checked Oct 16, 2026)
- IRS: Publication 15 (Circular E), 2026 (checked Oct 16, 2026)
- dol.gov/agencies/whd/minimum-wage/state (checked October 2026)
This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.