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Indiana Tax Cuts to Take Effect July 1

Indiana Tax Cuts to Take Effect July 1

May 30, 2023 Last Edit: June 5, 2025

Lawmakers voted to speed up a reduction in the individual income tax rate

Indiana Tax Cuts to Take Effect July 1

Some small business owners will see a drop in their state income tax rate in the fiscal year beginning July 1.

During this year’s session of the General Assembly, lawmakers voted to speed up the individual income tax rate reductions first approved a year ago. Under the plan signed into law by Gov. Eric Holcomb, it will decline from the current rate of 3.15% to 3.05% and continue to decline until it reaches 2.9% in 2027, two years earlier than originally planned.

That’s important because most small businesses are organized as pass-through entities, meaning any profits pass through the business to the owner, who pays taxes at the individual tax rate.

Lawmakers also approved a new federal tax benefit for small businesses. The creation of the pass-through entity tax law effectively eliminates the $10,000 cap on an individual’s state tax deduction put into place in 2018 by the Federal Tax Cuts and Jobs Act.  

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