Indiana Senate Approves Income Tax Rate Bill

Source: Tetiana Kitura / Getty

The Indiana Senate passed Senate Bill 451. It’s an effort that could lower state income taxes and bring Indiana closer to eliminating them entirely.

The bill, proposed by Sen. Travis Holdman, would reduce the income tax rate from 2.9% in 2027 to 2.85% in 2030, but only if state revenue grows by more than 3% annually. Holdman has stated that he wants to eliminate state income tax in Indiana. If revenue continues to rise, the tax rate could keep decreasing in even-numbered years. A complete phase-out would take over 100 years.

Source: Jon Cherry / Getty

For a family earning $70,000, the tax cut would mean about $140 in savings per year starting in 2030. Someone earning $100,000 would save about $200 annually.

However, the bill does not guarantee tax cuts. Lawmakers could pause reductions in odd-numbered years, depending on the state’s financial situation.

There was no discussion on the bill, which passed 49-0. The bill now moves to the Indiana House, where legislators may amend it.

Source: Pra-chid / Getty

As of 2025, Indiana ranks 10th overall in the Tax Foundation’s 2025 State Tax Competitiveness Index.

However, it’s important to note that Indiana allows counties to impose additional local income taxes, which can range from 0.5% to 3%, potentially affecting the overall tax burden for residents.