Indiana LLC Taxes — Step 8 of 8

How an Indiana LLC Is Taxed by Default

Indiana’s individual rate is 2.95% for 2026 and 2.90% for 2027. The October 1, 2026 Departmental Notice #1 county withholding chart ranges from 0.5% to 3.0%. County rates can change in January and October. Use the applicable IT-40 return instructions for final liability rather than treating the withholding chart as the return calculation. Federal self-employment tax depends on classification, earnings, owner status, wages and annual Social Security limits. Not every distribution is subject to a flat 15.3%. An S election requires eligibility, reasonable compensation and a comparison of payroll and compliance costs; no universal profit threshold establishes savings.

• 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 and Indiana Tax Planning

Choose a tax-planning topic below. Use the applicable return instructions and your actual facts to calculate liability.

The S-Corp Election Option

Eligible pass-through entities may elect Indiana PTET. Compare the election, owner credits, current SALT rules, federal classification and all compliance costs using current DOR instructions. Federal self-employment tax depends on classification, earnings, owner status, wages and annual Social Security limits. Not every distribution is subject to a flat 15.3%. An S election requires eligibility, reasonable compensation and a comparison of payroll and compliance costs; no universal profit threshold establishes savings.

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.

About the Author

Ahmad Adil

Ahmad Adil is the founder and CEO of LLC School. Rate references were checked against the October 2026 DOR guidance. Complete tax-return and S-election modeling remain outside this guide.

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