How the Payroll Process Calculates Indiana County Taxes

Employees working or living in Indiana, might be subject to Indiana county taxation. Use their Tax Withholding card to set their county of residence or employment as of January 1.

These values must be up-to-date before you run the first payrolls of the calendar year.

How the county tax is determined

To determine Indiana county tax eligibility, the payroll process uses this hierarchy based on the employee's residence or work county.

1. As of January 1, if the employee is living in an Indiana county that has county income tax, the person is subject to that county's resident tax rate until:

   • End of the year

   • They're no longer an Indiana resident

2. If the county where the employee lived hasn't adopted a county income tax, they're subject to the nonresident tax rate of the county in which they were employed on January 1 of the current tax year.

3. If the employee moves to, or works in, another Indiana county after January 1, their county status doesn't change until the next calendar tax year.

4. If the employee moves to, or works in, a state other than Indiana, they're no longer subject to Indiana taxes.

How state and county overrides are used

When you set allowances and withholding overrides for state and county taxes, the payroll process uses these rules to determine the tax amount.

Override	How they are calculated
Allowances	If an override is set on both the state and county components, the payroll process uses the county override. If an override is set on the state component, and the county component has default settings, it uses the default county setting. If an override is set on the state component, and there isn't a county component, it uses the state override.
Additional County Withholding	If withholding amounts are set on both the state and county components, it uses the county one. If a withholding amount is set on the state component, and the county component has a null or $0 value, it uses the state amount. If a withholding amount is set on the state component, and there isn't a county component, it uses the state amount.