Residency rules, sticky taxes, and first-year steps (2026)
2026.1 Edition · Revised 2026-07-25 · DomusDay Research
The move changes the rate; the record decides whether it sticks. Illinois keeps taxing until domicile actually changes — clear and convincing evidence to overcome the residency presumptions, with no fixed day threshold to hide behind. Below: what follows leavers, and the Indiana steps that build the record.
Who has to show it: on the taxpayer asserting the change; only one domicile at a time.
Each Indiana county levies a local income tax on residents — 0.5% to 3.0% for 2026 — on top of the flat state rate. The county of residence on January 1 is fixed for the entire year; a mid-year arrival resided out of state that day, so residence-based county tax begins the following January.
Source ↗Indiana's flat individual rate is on a scheduled decline — 3.00% for 2025, 2.95% for 2026, and 2.90% for 2027, per the Department of Revenue. Capital gains are taxed at the same flat rate, with no preferential treatment.
Source ↗Indiana's reciprocal wage agreements cover Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin — not Illinois. A new Indiana resident who keeps an Illinois job reports the wages in both states, with Indiana's credit for taxes paid to other states applied against the Indiana bill. The agreements do not reach local income taxes.
Source ↗Indiana is the easy half. Illinois decides whether the move counts, and it decides on evidence — the two tests below stay live until the record closes them out.
The full rules, the audit program, and every source: the complete Leaving Illinois guide →
Top-bracket rates differ by 2%: Illinois at 4.95%, Indiana at 2.95% — an illustration at the top marginal rate, not an effective-rate calculation.
The first weeks in Indiana matter more than they look: each step below produces a dated document, and dated documents are what answer a Illinois examiner years later. Do them early and the record starts on your side of the timeline.
A new Indiana resident holding a valid out-of-state driver's license obtains an Indiana license within 60 days of becoming a resident, surrendering credentials from other states and documenting identity, Social Security number, lawful status, and Indiana residency.
Source ↗Vehicles with out-of-state titles are titled in Indiana within 60 days of establishing residency — via a title application or Request for Title (State Form 1014) — with a VIN inspection, proof of address, and proof of insurance; administrative penalties attach past the deadline.
Source ↗Voter registration closes 29 days before each primary, general, municipal, or special election, and eligibility includes living in the precinct continuously for at least 30 days before the election. Online registration through the Indiana Voters portal requires a current Indiana credential.
Source ↗The homestead standard deduction and supplemental homestead deduction are claimed through the county auditor for an owner-occupied primary residence; applications completed and dated by December 31 apply to the next year's tax bill.
Deduction amounts are mid-phase under SEA 1 (2025): the standard deduction falls from $40,000 (2026 assessment) to $0 by 2030 while the supplemental deduction rises toward 66.7% of remaining assessed value.
Source ↗Registered vehicles carry Indiana liability coverage at the 25/50/25 minimums: $25,000 for bodily injury to or death of one individual, $50,000 for two or more individuals in one accident, and $25,000 for property damage in one accident.
Source ↗The county of residence on January 1 fixes the county local income tax for the entire year. An arrival who resided out of state on January 1 is not a county resident for that first year; the workplace county's rate applies instead when the principal place of business or employment was in an Indiana county on that date.
Source ↗The arrival year is filed on Form IT-40PNR, the part-year and full-year nonresident return, reporting income received while an Indiana resident along with the January 1 county codes.
Source ↗Indiana's reciprocal wage agreements cover Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin — not Illinois. An Indiana resident who keeps an Illinois job reports the wages in both states, with Indiana's credit for taxes paid to other states applied against the Indiana liability; the agreements do not extend to local income taxes.
Source ↗Everything Indiana asks of a new resident, on its own plate: the Moving to Indiana guide →
Every rule on this page traces to a statute, regulation, or agency publication, listed in full on each state's own plate.
A flat state rate — 2.95% for 2026, scheduled to fall to 2.90% in 2027 — plus a county local income tax of 0.5% to 3.0% set by the county of residence on January 1. Capital gains are taxed at the same flat rate, and Indiana has no estate or inheritance tax (the inheritance tax was repealed for deaths after December 31, 2012).
County of residence and county of principal employment are determined each January 1 and fixed for the entire year. A mover who arrives from Illinois mid-year resided out of state on January 1, so residence-based county tax begins the following January 1 — though someone whose principal place of employment was already in an Indiana county on January 1 owes that county's rate on Indiana-source income.
No. Indiana's reciprocal agreements cover Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin only. An Indiana resident who keeps an Illinois job reports the wages in both states, with Indiana's credit for taxes paid to other states applied against the Indiana liability; the agreements also never extend to local income taxes.
An Indiana driver's license and vehicle titles within 60 days of becoming a resident, voter registration (which closes 29 days before an election), Indiana auto coverage at the 25/50/25 minimums, the homestead deduction application by December 31, and Form IT-40PNR for the arrival year with the January 1 county codes.
2026.1 Edition · Revised 2026-07-25 · DomusDay Research