By Margaret Eisler
On April 16, 2025, Indiana Governor Mike Braun signed legislation lowering the state’s individual adjusted gross income tax rate beginning in tax year 2030, dependent on meeting a calculated threshold of state revenue growth in specified fiscal years. (L. 2025, S451, effective 07/01/2025.)
Threshold calculation.
Beginning in 2028, and in each subsequent even-numbered year until 2043, the budget agency will calculate and compare the percentage of revenue growth in state general fund revenue collections between stated state fiscal years, including the comparison of the percentage of revenue growth between the amount of forecasted state general fund revenue collections for particular state fiscal years and the actual state general fund revenue collections for particular state fiscal years, to determine whether statutory conditions are satisfied. The calculation must be made no later than 30 days after the end of each even-numbered state fiscal year.
“State fiscal year” means the annual period commencing July 1 of a given year and ending June 30 of the following year.
Not later than September 1 of each even-numbered calendar year, the budget agency will certify the results to the Department of Revenue and to the Legislative Council, and report to the State Budget Committee: (1) the percentage of revenue growth determined; and (2) the adjusted gross income tax rate determination made for the following even-numbered year.
Not later than November 1 of each odd-numbered calendar year, the Department will provide notice of the determination and the applicable tax rates for each even-numbered calendar year on the its website in a Departmental Notice.
Decreased rates.
Under the legislation, in each even-numbered fiscal year starting FY 2028 and ending FY 2040, the rate will be reduced if the revenue collections calculated for the four prior fiscal years, and the forecasted revenue growth in the fiscal year ending in the following calendar year, are at least 3.5% above the revenue collections for the prior fiscal year.
Under this calculation, the tax rate would be 2.85% for tax years 2030 and 2031, 2.8% for tax years 2032 and 2033, 2.75% for tax years 2034 and 2035, 2.7% for tax years 2036 and 2037, 2.65% for tax years 2038 and 2039, 2.6% for tax years 2040 and 2041, and 2.55% for tax year 2042 and after.
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