How to File LLC Taxes in Indiana? (A Complete Guide)
Indiana LLCs are taxed based on their structure - single-member LLCs and multi-member LLCs are treated differently. You can face steep penalties and even lose good standing if taxes are filed incorrectly or missed entirely.
As a business consultant who has worked with over 40 Indiana LLC owners on their annual tax obligations in the past 5 years, I've laid out every tax type, rate, and filing form your LLC needs to stay compliant and avoid penalties.
Quick Summary
- An LLC with one owner pays an Indiana individual income tax of 3% (tax year 2025) and a 15.3% federal self-employment tax.
- If your commercial LLC sells tangible property in Indiana, it must pay sales tax of 7%.
- All employers in Indiana must pay taxes and obtain unemployment insurance and workers’ compensation.
How Are LLCs Taxed in Indiana?
LLCs in Indiana are taxed according to the number of members they have. A single-member LLC is taxed like a sole proprietorship, and multi-member LLCs are taxed like a partnership.
Additionally, for tax purposes, LLCs are pass-through entities by nature, meaning that all profits and losses are distributed to the members who file personal tax returns.
The IRS also permits Indiana LLCs to be taxed as C or S corporations, but these elective statuses have different tax structures on their adjusted gross income.
State Taxes for Indiana LLCs
The state taxes for Indiana LLCs are based on the following structures:
1. Single-Member LLCs
In Indiana, a single-member LLC is taxed in the same way as a sole proprietorship. This indicates that the proprietor records the income from the business and they pay income taxes to the IRS.
Additionally, a 15.3% self-employment tax is due by the LLC owner.
2. Multi-Member LLCs
For federal income tax, a multi-member LLC in Indiana with more than one shareholder is considered a partnership. As a result, the partnership doesn't report any employer taxes to the government.
All earnings are distributed equally to the shareholders, who will pay federal income tax on their shares as a result of LLC pass-through taxation.
3. LLCs Taxed as S-corp
The Internal Revenue Service allows LLCs to be taxed as an S-Corp. Once an LLC is eligible for this elective tax status, it is only liable to pay individual income tax.
The distinction is that an LLC with S-corp status can make pre-tax payments to its members not subject to the 15.3% self-employment tax.
To get S-Corp status for your Indiana LLC, submit Form 2553 to the IRS. After receiving S-corp status, you will utilize Form 1120-S to report your income tax once your application has been accepted [1].
4. LLCs Taxed as C-corp
LLCs who choose to be taxed as C-Corps must pay a corporation tax of 4.9% on their revenue.
Because corporations are pass-through organizations, Indiana LLC members are subject to double taxation since they also pay taxes on their dividend income.
Federal Taxes for Indiana LLCs
Indiana limited liability companies are also subject to paying the following federal income taxes:
1. Indiana State Income Tax
Members of LLCs and S-corps must pay an Indiana income tax of 3% for tax year 2025, dropping to 2.95% in 2026. Each member must submit Form IT-40 to the state to disclose their share of the LLC's earnings [2].
Each member of your LLC must also submit Form IT-20 to pay their share of Indiana's 4.9% corporate income tax if your LLC chooses to be taxed as a C-corp.
2. Federal Self-Employment Tax
All business owners in Indiana must pay the federal self-employment and withholding taxes of 15.3%, regulated by the Federal Insurance Contributions Act (FICA).
The self-employment tax comprises Medicare and Social Security benefits.
Other Taxes
There are other LLC business taxes that your Indiana LLC may report to the government.
These taxes include the following:
1. Indiana Sales Tax
You must register to collect a sales tax of 7% if your company sells products or tangible personal property.
You can lawfully perform retail transactions in Indiana if you register for a sales license and collect sales tax.
After your registration has been received and processed, a Registered Retail Merchant Certificate (RRMC) will be sent to you [3].
If you have more than one retail address, you must have a certificate visible at each place where your firm is located.
There is no general sales tax on services in Indiana; however, certain specific services are subject to tax, such as:
- Renting real estate for fewer than 30 days
- Leasing tangible personal property
- Obtaining licenses for pre-written software
- Cable television services
- Telecommunications services
- Utility services
2. State Employer Taxes
You should budget for unemployment insurance taxes and workers' compensation premiums if your firm employs employees:
Unemployment Insurance (UI)
Indiana's unemployment insurance tax rates range from 0.5% to 7.4% for established employers. New employers in most industries pay a standard rate of 2.5% for the first 3 years.
Note that the UI tax rates fluctuate according to Indiana's economic climate.
Workers' Compensation
Workers' compensation insurance covers employees who have work-related injuries for their medical costs and lost wages.
Rates are determined by the sort of work the limited liability company does and the number of covered employees.
According to Indiana law, any company that hires even one full or part-time employee must have workers' compensation insurance.
“LLC members, independent contractors, and railroad workers are exempted from maintaining workers' compensation in Indiana.”
- Dave Bagley, Business Attorney
3. Local Taxes
There are jurisdictions in Indiana that collect local taxes, including admissions taxes, food and beverage taxes, and innkeeper taxes.
It's important to contact the county clerk's office to understand the local taxes that apply to your business entity.
4. Industry Taxes
If your company operates in certain sectors, Indiana imposes the following industry taxes:
- Alcoholic Beverage Tax
- Gaming Tax
- Fireworks Tax
- Cigarette/Other Tobacco Tax
- Estate Tax
- Gasoline Use Tax per gallon
- Charity Tax
- Excise Tax on Controlled Substances
- Aircraft Tax
If you're unsure what industry taxes apply to your company, we recommend visiting the Indiana Department of Revenue.
Related Articles:
- Setting Up an LLC in Indiana
- Professional Registered Agent Services in Indiana
- High-Quality LLC Formation Services in Indiana
What Is Tax-Deductible for an LLC in Indiana?
Tax-deductible for an LLC in Indiana includes renter's deduction, homeowner's residential property tax deduction, homeschool deduction, Indiana's earned income credit, and disability retirement deduction.
Other tax-deductibles include:
- Indiana adoption credit: A credit equal to 20% of the federal adoption credit, up to $2,500 per eligible child, is available to Indiana taxpayers who claimed a federal adoption credit.
- Unified tax credit for the elderly: Individuals 65 or older with less than $10,000 can claim this credit at the end of the year.
- CollegeChoice 529 education savings credit: Indiana taxpayers who contribute to an Indiana529 plan may claim a 20% state income tax credit of up to $1,500 per year ($750 for married filing separately).
- Public school educator expense credit: A credit of up to $100 is available to eligible educators in Indiana public K-12 schools, including teachers, librarians, counselors, and principals, for qualified classroom supply expenses. The credit rises to $200 for married couples filing jointly when both spouses qualify.
- Disability retirement deduction: Taxpayers who retire with a disability can claim a maximum deduction of $5200.
- Property tax exemption: If your company uses its property for charitable, educational, religious, or scientific purposes, you can claim Indiana's property tax exemptions.
Indiana LLC Tax Filing Deadlines
Indiana LLC members must file individual income tax returns by April 15 each year using Form IT-40. Multi-member LLCs filing as partnerships use Form IT-65, also due April 15.
LLCs taxed as C-corps file Form IT-20 by April 15. S-corp returns on Form IT-20S are due the same day. Indiana automatically grants a seven-month extension to file but not to pay.
FAQs
Does Indiana Have a State Property Tax Rate?
No, Indiana does not have a state property tax rate. However, any property is assessed and taxed according to the market value.
What Goods Are Exempt From Sales and Use Tax in Indiana?
The goods exempt from sales and use tax in Indiana include groceries, medical equipment, public transportation equipment, and all nonprofit transactions.
What Are the Applicable Personal Income Tax Rates in Indiana?
The applicable personal income tax rate in Indiana is 3% for tax year 2025. County income taxes add to this, with rates ranging from 0.5% to 3% depending on the county.
