Indiana's state income tax rate is 2.95%, compared with 4.95% in Illinois, so Indiana usually looks like the cheaper state on paper. But every Indiana county adds its own income tax, typically between about 1% and 3%, and in a higher-rate county your Indiana paycheck can end up smaller than an Illinois one.
This comparison of Illinois vs Indiana taxes shows 2026 paycheck estimates at two income levels, with Indiana county rates at the low and high ends of that range, and the point where the two states roughly break even.
How each state taxes wages
Both states use a flat income tax, so the math is simpler than in states with many brackets. Federal income tax, Social Security (6.2% up to $184,500) and Medicare (1.45%) are the same in both.
| 2026 rules | Illinois | Indiana |
|---|---|---|
| State rate | 4.95% flat | 2.95% flat |
| Standard deduction | None | None |
| Personal exemption | $2,925 per person | $1,000 per person |
| Local income tax | Generally none on wages | Every county, typically about 1% to 3% |
Illinois
Illinois taxes all income at 4.95% after a personal exemption of $2,925 per person. The state has no standard deduction, and its constitution requires a flat rate.
Indiana
Indiana's state rate is 2.95% after a $1,000 personal exemption. All 92 Indiana counties levy a county income tax on top, so your combined rate depends on the county where you live or work. We don't list county rates here; look up your county's current rate with the Indiana Department of Revenue and enter it in the local tax box of the paycheck calculator.
Illinois vs Indiana taxes on an hourly paycheck
Take a single worker earning $26 an hour for 40 hours a week, paid weekly. That's $1,040 a week, or $54,080 a year. Here's one weekly paycheck in Illinois, and in Indiana with three different county assumptions. All figures are estimates from our calculator.
| Per weekly paycheck | Illinois | Indiana, no county tax | Indiana + 1% county | Indiana + 3% county |
|---|---|---|---|---|
| Federal income tax | $82.88 | $82.88 | $82.88 | $82.88 |
| Social Security + Medicare | $79.56 | $79.56 | $79.56 | $79.56 |
| State income tax | $48.70 | $30.11 | $30.11 | $30.11 |
| County income tax | $0.00 | $0.00 | $10.40 | $31.20 |
| Take-home pay | $828.86 | $847.45 | $837.05 | $816.25 |
Over a year, the Illinois worker takes home about $43,101. In Indiana, it's about $43,527 with a 1% county tax, or about $42,445 with a 3% county tax. So Indiana comes out roughly $426 ahead at the low end of the county range and about $656 behind at the high end.
The "no county tax" column is only there to show the state rate by itself. In practice, nearly every Indiana worker pays some county tax.
Worked example: a married couple earning $95,000
Now a married couple filing jointly with combined pay of $95,000, paid biweekly (26 paychecks):
| Scenario | State tax per paycheck | County tax per paycheck | Take-home per paycheck | Take-home per year |
|---|---|---|---|---|
| Illinois | $169.73 | $0.00 | $2,933.83 | $76,280 |
| Indiana + 1% county | $105.52 | $36.54 | $2,961.50 | $76,999 |
| Indiana + 3% county | $105.52 | $109.62 | $2,888.42 | $75,099 |
Federal income tax ($270.77), Social Security ($226.54) and Medicare ($52.98) are identical in every row. At a 1% county rate, the couple keeps about $719 more a year in Indiana. At 3%, they keep about $1,181 less than in Illinois.
Where the two states break even
In both examples, the Indiana and Illinois paychecks come out about even when the Indiana county rate is roughly 1.75% to 1.8%. Below that, Indiana generally leaves you with more; above it, Illinois does. The exact break-even point shifts with your income and exemptions, so run your own numbers in the Illinois paycheck calculator and the Indiana paycheck calculator, entering your county's rate for Indiana.
Crossing the state line for work
Many people live on one side of the border and commute to the other, especially around Chicago and northwest Indiana. In general, a state can tax nonresidents on wages earned for work done there, and your home state taxes all your income but usually gives a credit for tax paid to the other state. Some neighboring states have reciprocity agreements that simplify this. Check with both states' revenue departments, or read our guides to living in one state and working in another and state tax reciprocity agreements.
Indiana's county tax can also depend on where you live and where you work, which matters if you cross county lines or move to Indiana from another state. Ask your payroll department which county it's withholding for, and compare it with your own address.
What else to consider
- Pre-tax deductions: 401(k) and HSA contributions lower federal taxable wages in both states, and generally lower state wages too. A bigger deduction saves slightly more in Illinois because its rate is higher.
- Dependents: Both states give per-person exemptions, but Illinois's is much larger, which narrows the gap a little for bigger households.
- Costs beyond income tax: Property taxes, sales taxes and housing costs differ by area. Our guide to comparing salaries across states covers how to look at the whole picture.
Frequently Asked Questions
Is Indiana's income tax lower than Illinois's?
The state rate is: 2.95% in Indiana versus 4.95% in Illinois. Once you add Indiana's county income tax, the combined rate can be close to or above Illinois's, depending on your county.
Does Illinois have local income taxes on wages?
Illinois cities and counties generally don't levy income taxes on wages, so an Illinois paycheck usually shows just the 4.95% state tax.
How do I find my Indiana county tax rate?
Check the Indiana Department of Revenue's current county rate list, then enter that rate in the calculator's local tax box.
Why is there no standard deduction in either state?
Both Illinois and Indiana use personal exemptions instead of a standard deduction. Illinois's exemption is $2,925 per person and Indiana's is $1,000.
Sources
- Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
- IRS Publication 15, Employer's Tax Guide
- SSA: Contribution and Benefit Base
Run the numbers for your state
Written and checked against IRS, Social Security Administration and state tax agency publications for the 2026 tax year. General information, not tax, legal or financial advice. Read our editorial policy, calculation methodology and sources.