Bill > HB1651

This bill eliminates the state individual income tax in Indiana by gradually reducing the tax rate to zero percent (0%) starting July 1, 2025. Currently, Indiana has a progressive income tax rate that has been gradually decreasing over the years, with the rate set at 3% for taxable years beginning after December 31, 2024, and before January 1, 2026. The bill will completely phase out the individual income tax rate to 0% for taxable years beginning after December 31, 2025. Additionally, the bill ensures that for local income tax (LIT) purposes, the calculation of adjusted gross income will continue to be based on the tax provisions and rate that were in effect before the elimination of the state income tax, which means local taxes will still be calculated as if the 3% tax rate was still in place. This approach allows local governments to maintain their current tax revenue structure while the state eliminates its individual income tax.