Indiana taxes individual income at a flat state rate of 3.00 percent, but out-of-state travel nurses must also account for local county income taxes. Every county in Indiana imposes its own local tax rate, ranging from 1.00 to over 3.00 percent, making total state and local tax withholding dependent on hospital location.
Travel nurses working at facilities in Indianapolis, Fort Wayne, South Bend, or Evansville must navigate both state and county tax obligations.
State and county tax mechanics in Indiana
Indiana assesses its flat 3.00 percent rate on adjusted gross income earned within the state. In addition, under Indiana tax law, nonresidents who work in an Indiana county as their principal place of business or employment on January 1 of the tax year are subject to that county local income tax rate.
If you began working your assignment after January 1, you may not be subject to county tax withholding, depending on your residency timeline and employer setup. Check your weekly pay stubs to verify whether county taxes are being deducted.
You can project your net hourly pay and simulate Indiana state tax deductions with our Contract Analyzer.
Five-state reciprocity agreements
Indiana maintains broad income tax reciprocity agreements with five bordering states: Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin.
If your permanent tax home is in one of these five states, your wages earned in Indiana are exempt from Indiana state individual income tax. You will pay state income tax only to your home state. To claim the exemption, submit Form WH-47 (Certificate of Residence) to your travel agency payroll department.
Reciprocity applies solely to Indiana state income tax, not necessarily to local county taxes. Review state specific filing policies on the Indiana Department of Revenue portal.
Filing Form IT-40PNR
Nurses who are not residents of a reciprocal state must file Indiana Form IT-40PNR (Part-Year Resident or Nonresident Individual Income Tax Return). On Schedule A, you apportion your income by dividing Indiana source wages by total federal wages.
Non-taxable housing, meals, and incidentals stipends are excluded from Indiana taxable income when supported by a valid tax home. To ensure your tax home satisfies federal standards, take our Tax Home Quiz.
Frequently asked questions
How do Indiana county income taxes affect out-of-state travel nurses?
In addition to Indiana flat 3.0 percent state tax, nonresidents whose principal place of employment on January 1 was in an Indiana county are subject to local county income taxes, which vary from 1.0 to over 3.0 percent.
Which states have reciprocity agreements with Indiana?
Indiana maintains individual income tax reciprocity with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. Residents of these states pay state tax only to their home state.
What form do I submit to claim reciprocity exemption in Indiana?
To claim exemption from Indiana state income tax withholding under reciprocity, submit Form WH-47 (Certificate of Residence) to your travel nurse staffing agency payroll department.