Complete Guide to Indiana LLC Taxes in 2025
Indiana offers one of the most favorable tax environments for LLC owners in the United States. With a flat 3.15% state income tax rate -- the lowest flat rate in the country as of 2024 -- no entity-level business tax, and a minimal $31 biennial report fee, the Hoosier State has positioned itself as a premier destination for business formation. However, Indiana's unique county income tax system adds a layer of complexity that LLC owners must understand. This comprehensive guide covers everything you need to know about Indiana LLC taxes in 2025.
How Indiana Taxes LLCs
Indiana treats LLCs as pass-through entities, following the federal classification. The LLC itself does not pay Indiana income tax. Instead, profits pass through to individual members who report their share on Indiana Form IT-20 (Individual Income Tax Return). Indiana does not impose a franchise tax, gross receipts tax, or any other entity-level tax on LLCs.
For single-member LLCs, income flows to Schedule C federally and then to the Indiana return. For multi-member LLCs, the LLC files Indiana Form IT-65 (Partnership Return) as informational, with each member receiving a Schedule K-1.
Key Point: Indiana's 3.15% flat rate was achieved through a series of annual reductions. The rate dropped from 3.23% in 2023 to 3.15% in 2024, with the possibility of further reductions tied to state revenue performance. This makes Indiana's state income tax burden among the very lowest for LLC owners nationwide.
Indiana County Income Tax
While Indiana's state income tax rate is impressively low, LLC owners must also pay county income tax. Every Indiana county imposes its own local income tax, with rates ranging from approximately 0.5% to 2.9%. This is a critical factor that many new LLC owners overlook.
County income tax rates are set by each county's fiscal body and can change annually. Some notable rates include:
| County | Rate | County | Rate |
|---|---|---|---|
| Marion (Indianapolis) | 2.02% | Allen (Fort Wayne) | 1.48% |
| Lake (Gary area) | 1.50% | Hamilton (Carmel) | 1.00% |
| St. Joseph (South Bend) | 1.75% | Vanderburgh (Evansville) | 1.35% |
The combined state + county rate in Indiana ranges from roughly 3.65% to 6.05%, which is still competitive with most neighboring states.
Federal Taxes for Indiana LLC Owners
- Self-Employment Tax (15.3%): Covers Social Security (12.4% up to $176,100) and Medicare (2.9% + 0.9% surtax above $200K/$250K MFJ).
- Federal Income Tax: 10% to 37% based on brackets.
- QBI Deduction: Up to 20% under Section 199A.
Tax Tip: Indiana's low 3.15% flat rate means the self-employment tax savings from S-Corp election become proportionally more significant. If your LLC net income exceeds $40,000, seriously evaluate S-Corp election. Use our S-Corp Tax Calculator to compare.
Indiana LLC Annual Filing Requirements
Indiana LLCs file a Biennial Business Entity Report with the Indiana Secretary of State every two years. The filing fee is just $31, which works out to $15.50 per year -- among the cheapest in the nation. The report is filed during the anniversary month of the LLC's formation, in odd or even years depending on when the LLC was formed.
Indiana LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Individual (IT-20) | April 15 | Yes, to November 15 |
| Partnership (IT-65) | April 15 | Yes, to October 15 |
| Biennial Report | Anniversary month (every 2 years) | No extension |
| Estimated Tax (IT-40ES) | Apr 15, Jun 15, Sep 15, Jan 15 | No |
Indiana vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| Indiana | 3.15% flat + county | $31 biennial | None |
| Illinois | 4.95% flat | $75 | 1.5% replacement |
| Ohio | 0-3.5% (2 brackets) | $0 | CAT being phased out |
| Michigan | 4.05% flat | $25 | None |
| Kentucky | 4% flat | $15 | LLET (min $175) |
Indiana PTET Election
Indiana offers a Pass-Through Entity Tax election allowing eligible LLCs to pay state income tax at the entity level. This serves as a SALT cap workaround, potentially saving federal taxes for members who exceed the $10,000 SALT deduction limit.
Common Indiana LLC Tax Mistakes
- Forgetting county income tax: The 0.5-2.9% county tax adds significantly to your total burden.
- Using outdated state rates: Indiana has reduced its rate multiple times recently -- ensure you use 3.15% for 2024/2025.
- Missing biennial report: It's every two years, not annually, which makes it easy to forget.
- Not evaluating S-Corp election: Indiana's low rate magnifies SE tax savings.
- Overlooking estimated tax requirements: Indiana requires quarterly estimated payments if you'll owe $1,000+.
Dissolving an Indiana LLC
File Articles of Dissolution with the Indiana Secretary of State ($30 online). Settle all debts, file final state and federal returns, and close your tax accounts with the Indiana Department of Revenue.