Indiana cities and towns could set income taxes up to 1.9%

City and town leaders could adopt a local income tax rate up to 1.9%. Cities and towns with at least 2,000 residents generally qualify. Beginning after 2030, some that fall below that mark may keep using an earlier count. Those that choose county tax treatment do not qualify. Leaders must adopt the rate by ordinance. The tax would apply to local taxpayers within city or town boundaries and would be added to the county tax. A city or town could first impose this rate on or after January 1, 2028.

County officials could adopt separate income tax rates for local services. The county rates cover county residents. The city and town rate covers only residents outside places eligible to set their own rate. The county-set rates could total up to 2.9%. Individual caps are 0.7% for county services, 0.2% for fire and emergency medical services, 0.2% for other noncity local governments excluding fire districts, and 1.9% for the city and town rate. The first three cannot exceed 1% combined. These provisions would take effect July 1, 2027, if enacted.

Adopted county and city or town income tax rates could remain in place without automatic annual expiration. This covers county income tax rates and rates set by eligible cities and towns. Local officials would still need an ordinance to adopt a rate. This provision would take effect July 1, 2027, if enacted.