Bill > HB1345

This bill proposes to eliminate the state adjusted gross income tax by gradually reducing the tax rate to zero percent for both individual and corporate taxpayers, starting in the 2026 tax year. For individual taxpayers, the income tax rate will steadily decrease from 3.4% in earlier years to 3% in 2025, and then drop to 0% beginning in 2026. Similarly, for corporations, the tax rate will decrease from 8.5% to 4.9% by 2026, and then also drop to 0%. To offset the potential revenue loss from eliminating the income tax, the bill mandates adjustments to the state gross retail tax. Additionally, the bill ensures that for calculating local income tax (LIT), taxpayers' adjusted gross income will still be calculated using the tax rate that was in effect before the elimination of the state income tax (specifically, the 3% rate from 2025). This approach allows local governments to maintain their current income tax structures while the state transitions away from its income tax.

Budget and Finance

https://iga.in.gov/legislative/2025/bills/house/1345/details