1040-IN: County tax (CT-40, CT-40PNR)

Alerts and notices

Use the County Tax section of the INGen screen in the General folder to enter county tax information. To calculate county tax on Schedule CT-40, CT-40PNR, or Form IT-40RNR, you must first determine the county tax rate and county taxable income.

Determining the county tax rate

Each of the 92 counties in Indiana has its own rate. For purposes of determining the proper county tax rate, it does not matter if the taxpayer’s county of residency status or county of employment status changes during the year. The rate itself is based on the taxpayer’s residency or employment status as of January 1 of the tax year.

Residency status

If a taxpayer and/or spouse lived in Indiana on January 1, enter the Indiana county they were living in at that time in the County of residence field(s) on the INGen screen in the General folder. Indiana-source income will be taxed at this county’s tax rate.

If the taxpayer or spouse were military personnel that are exempt from county tax, enter code 00.

If a taxpayer and/or spouse did not live in Indiana on January 1, principal employment status will determine their tax rate(s).

For residents of KY, MI, OH, PA, and WI, see 1040-IN: Form IT-40RNR (Reciprocal non-resident return, County tax).

Note: A taxpayer can be a nonresident of Indiana for state income tax purposes but a resident of a specific county for county income tax purposes. For example, an out-of-state college student may be considered a nonresident for state income tax purposes but may be considered a resident of the Indiana county they are housed in while attending college. The income that is taxable for county purposes may be limited to Indiana sources, yet the county income itself is taxed at the county resident rate. Contact the Indiana Department of Revenue for further guidance.

Employment status

If a taxpayer and/or spouse did not live in Indiana on January 1 but was earning principal employment income in Indiana on January 1, enter the county they were earning the income in the County of employment field on the INGen screen in the General folder. A taxpayer’s principal employment income will be taxed at this rate.

If, on January 1, a taxpayer was not living in Indiana nor did they have principal employment in Indiana, there is no county tax, even if either of these statuses change after January 1. If an employer withheld Indiana state or county taxes, even though Indiana principal employment began after January 1, enter code 00.  

Determining county taxable income

If the taxpayer is filing single or married filing joint and both live and/or work in the same county, Schedule CT-40 or CT-40PNR, Section 1 uses the taxable income on Form IT-40 to calculate county taxable income.

If the taxpayers are married filing joint but live or work in different counties, county taxable income calculates on the Indiana Taxable Income Worksheet for the taxpayer and spouse individually. Schedule CT-40 or CT-40PNR, Section 1 uses this worksheet to calculate county taxable income.

The income for Schedule CT-40PNR, Section 2 calculates based on eligible Indiana source wages from W-2, Box 16 (not 18) and Indiana source income from Schedule C. Use the Principal employment income (Force) field on the INGen screen to force the amount reported on Schedule CT-40PNR, Section 2.

Credit against county income tax

Schedules CT-40 and CT-40PNR do not have a provision for credits against county income tax. Instead, credits against county income tax calculate on Schedule 6 or Schedule G. To calculate the Indiana Credit for Local Taxes Paid Outside Indiana Worksheet, enter code 18 in the State use field on the federal W2 screen for local wages/withholding from KY, MI, MO, OH. Force fields are also available on the INCr screen.

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