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Indiana Changes County Tax Rules and Increases Tax on Nonresidents

Posted by Admin Posted on Sept 29 2016

Effective January 1, 2017, Indiana will impose county taxes on nonresidents whose principal place of employment or business is in a taxing Indiana county at the same rate as imposed on residents.  In addition, all county income taxes (county adjusted gross income tax, county option tax and county economic development income taxes) will be combined into one combined local income tax.

Most Indiana counties impose one or more income taxes on individuals who are residents of the county, and on nonresidents whose principal place of employment or business is in the county, as of January 1.  Currently, the tax rate  imposed on nonresidents is less than the rate imposed on nonresidents.  However, as of January 1, 2017, nonresidents will be taxed at the higher resident rate.  Consequently, employers will need to change county tax withholdings on nonresidents beginning January 1, 2017.