How Indiana withholds on a bonus
Indiana withholds a bonus at its flat state rate, 2.95% for 2026 after the January cut from 3.0%, plus the county income tax for the employee's county of residence at the rate set by that county: 2.02% in Marion County (Indianapolis), 1.59% in Allen, 1.5% in Lake, 1.1% in Hamilton. Departmental Notice #1 sets both. On a $10,000 bonus the percentage method withholds $2,200 federal, $620 Social Security, $145 Medicare and $295 Indiana state, leaving $6,740 before the county line; a Marion County resident would see a further $202 withheld.
Because both the state and county rates are flat, the aggregate method changes Indiana's lines only marginally and raises the federal line to about $2,700 for a $60,000 earner paid every two weeks. Indiana's $1,000 exemptions are used up by salary, so a bonus is taxed at the full state-plus-county rate on the return and the withholding settles even.
What the withholding means for your Indiana return
Any refund on an Indiana bonus is federal. A $60,000 single filer's marginal federal rate is 12% up to $50,400 of taxable income and 22% above, so a $10,000 bonus is really taxed at about $1,450 federal against $2,200 withheld, and roughly $750 returns. Residents of Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin who earn a bonus in Indiana are withheld for their home state under reciprocity, though Indiana county tax may still apply for the county where they work. The Indiana paycheck calculator shows the marginal rates for any salary.