Employer Guidance On How To Compute Payroll Withholding For Indiana State And County Income Tax

Both the county of residence and the county of principal business or employment of an individual are determined on January 1 of the calendar year in which the individual’s taxable year begins. If a person resides in an Indiana county on January 1, or resides out-of-state on January 1, but has his or her principal place of work or business in an Indiana county as of January 1, he or she is subject to county tax at the rate corresponding to that Indiana county.

Withholding agents should withhold county tax based on the employee’s Indiana county of residence as of January 1 of the tax year. If the employee resides out-of-state on January 1, but has his or her principal place of work or business in an Indiana county as of January 1, then the withholding agent should withhold for the Indiana county of principal place of work or business.