Indiana Tax Changes 2026: A CPA Guide | HelloBooks Indiana allows tips, overtime and vehicle loan interest deductions for tax year 2026 only, and cuts the rate to 2.95% for 2026 and 2.90% for 2027.
Indiana adopted three of the new federal deductions for a single year. Clients who expect them to repeat in 2027 need to hear otherwise now.
Free Plan with invoices within 200 transactions, bills & quotes — no credit card.
Tips, overtime, vehicle loan deductions
2026 only
Applies: Tax year 2026From IRS.gov · checked October 10, 2026
DOR’s June 2026 bulletin covers IC 6-3-2-31, -32 and -33. Each deduction starts from the federal Schedule 1-A amount and is capped at what was deducted federally:
DOR’s rates page puts the individual adjusted gross income tax rate at 2.95% for 2026, falling to 2.90% in 2027. County rates are separate and several changed for 2026.
The bulletin states that these deductions are in place only for 2026. Add a line to 2026 organizers so tipped and hourly clients do not build the deduction into 2027 estimates. Indiana sales tax is covered at /us/sales-tax/indiana.
General information for tax professionals, not advice on a specific return. Figures are from IRS.gov on the date shown; check the current IRS instructions before filing.
Free Plan with full access to the AI accountant — no credit card, no time limit.