Indiana taxes capital gains at 3.05%. Combined with federal taxes, your effective rate on a home sale could reach 21.9%.
IN State Rate
3.05%
Flat tax rate
Federal Rate
15%
Most common long-term bracket
Combined Effective
21.9%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Indiana is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Indiana don't qualify for the exclusion. You'll owe 3.05% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Indiana, homes sold in October sell for 13% more than those sold in January (-17%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in Indiana and nearby states.
Indiana has one of the lowest flat tax rates at 3.05%, making it relatively friendly for home sellers with capital gains. The rate is straightforward with no brackets to navigate.
Additionally, county-level income taxes apply in Indiana, typically ranging from 1% to 3%, which are levied on top of the state rate. This can bring the effective rate to 4-6% depending on your county.
Indiana's affordable housing market means many sellers have gains that fall entirely within the federal exclusion, resulting in zero state or federal tax.
Investment property in Indianapolis, Fort Wayne, and college towns like Bloomington may generate gains that exceed the exclusion, particularly for long-term holders.
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