Indiana LLC Taxes — Step 8 of 8
The final step: understanding what you'll actually owe. As a default pass-through LLC, profit flows to your personal return — hit with federal tax, self-employment tax, Indiana's flat 2.95% state tax, and your county's own income tax on top.
By default, an Indiana LLC is a pass-through entity — profit flows to your personal 1040, taxed federally plus 15.3% self-employment tax. Indiana then applies a flat 2.95% individual income tax (dropping to 2.90% in 2027) — no brackets, and no standard deduction (Indiana uses personal exemptions instead). The detail most guides miss: all 92 Indiana counties levy their own additional income tax, ranging from about 0.5% to over 3%, based on where you live.
- Default tax status
- Pass-through
- SE tax rate
- 15.3%
- IN state tax
- Flat 2.95%
- IN 2027 rate
- 2.90%
- County tax range
- 0.5%–3.38%
- Personal exemption
- $1,000/person
- Previous step
- ← Step 7
How an Indiana LLC Is Taxed by Default
An LLC itself pays no federal income tax — it's a "pass-through" entity by default. Profits flow to the owners' personal returns, where multiple layers of tax apply:
- Single-member LLCs report profit on Schedule C, attached to the owner's personal Form 1040 and Indiana Form IT-40.
- Multi-member LLCs file Form 1065 federally, issuing each owner a Schedule K-1. Indiana requires a composite return for nonresident members under DOR Bulletin #72.
- Self-employment tax (15.3%) applies to net profit, covering Social Security and Medicare.
- Federal income tax applies via the standard progressive brackets, after the QBI deduction and standard deduction.
- Indiana's flat 2.95% tax then applies, plus your county's own income tax — this county layer is the detail most out-of-state guides skip entirely.
Federal + Indiana Tax Estimator
Enter your expected net profit and adjust the county tax slider to match your county of residence:
Estimate only, assumes federal standard deduction (no itemizing), the simplified 20% federal QBI deduction, and half of SE tax deducted above the line. Indiana's calculation uses profit minus half SE tax minus a $1,000-per-exemption amount ($2,000 for MFJ), applied at a flat 2.95% state rate plus your selected county rate. Doesn't include local licensing costs (Step 7) or the biennial report fee. Not tax advice — consult a CPA for your specific situation.
The S-Corp Election Option
Once your LLC's profit grows substantially, electing S-corp tax status (via Form 2553) can reduce your self-employment tax burden — you pay yourself a reasonable salary (subject to payroll tax) and take remaining profit as a distribution (not subject to SE tax). This adds payroll complexity and cost, so it typically only makes sense once net profit clears roughly $60,000–$80,000/year. Indiana pass-through entities can also elect the Pass-Through Entity Tax (PTET), letting the business pay Indiana tax at the entity level — a workaround for owners affected by the federal SALT deduction cap who itemize.
Indiana-Specific Tax Notes
- No standard deduction — Indiana uses personal exemptions instead ($1,000 per taxpayer/spouse, plus additional exemptions for dependents).
- No preferential capital gains rate — capital gains are taxed as ordinary income at the same flat state rate.
- Social Security is fully exempt — relevant if you're drawing benefits alongside LLC income.
- County tax is based on your county of residence as of January 1 — moving mid-year doesn't change your rate until the following tax year.
- Corporate rate (C-corp election) — a flat 4.90% Adjusted Gross Income Tax, one of the lowest corporate rates in the Midwest.
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Indiana LLC Taxes — FAQ
Ahmad Adil is the founder and CEO of LLC School. The tax figures here — the 15.3% self-employment rate, Indiana's flat 2.95% state rate for 2026, the county income tax range, and the $1,000-per-exemption structure — reflect current IRS and Indiana Department of Revenue guidance. This is educational information, not tax advice; consult a CPA for your specific situation.
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From naming your LLC to understanding your tax bill, you now have everything you need to form and run an Indiana LLC with confidence. Bookmark this guide — you'll likely come back to it as your business grows.