Marion County's Local Income Tax Rate: What the City-County Council Did and What It Costs You

A widely repeated summary of SB 1 (Senate Enrolled Act 1-2025) says it gave every county fiscal body authority to impose a "replacement" local income tax (LIT) of up to 1.2% starting in 2025, and that Marion County adopted one for 2026. Neither part holds up. The 1.2% rates in SEA 1 belong to a new LIT structure that House Enrolled Act 1210-2026 pushed back to January 1, 2029. Marion County's total LIT rate is 2.02%, the same as every year since at least 2023.

This post covers what Marion County's rate actually is, what the City-County Council and its LIT council partners have changed inside it, what it costs a household, and what changes in 2029.

2.02%Marion County total local income tax rate, unchanged 2023 through the proposed 2027 budget

The rate: 2.02%, no 2026 increase

The DOR's Departmental Notice #1, effective October 1, 2026, lists Marion County at 0.0202 (2.02%). Marion carries no asterisk, so its rate has not changed since the January 1, 2026 notice. Indianapolis's 2027 Proposed Budget Book charts the total at 2.02% for 2023, 2024, 2025, 2026, and 2027 as introduced.

Under current law, Marion County's expenditure rate may go as high as 2.75% (IC 6-3.6-6-2), plus property tax relief rates of up to 1.25% (IC 6-3.6-5-6). Those limits run through 2028.

Who decides

Until July 1, 2028, Marion County's LIT is set by its local income tax council. The budget book describes that council as the City-County Council plus the councils of Lawrence, Beech Grove, Southport, and Speedway, with votes weighted by population. The City-County Council holds over 90% of the votes. On July 1, 2028, LIT councils are repealed, and the county fiscal body becomes the sole county adopting body (IC 6-3.6-3-1, as amended). In Marion County, that is the City-County Council.

What the council actually changed

The change has been in the mix of the 2.02%, not the total. According to the 2027 Proposed Budget Book:

For 2026, the council shifted the property tax relief rate and part of the levy freeze rate into the certified shares and public safety rates. The goal was to put more of the 2.02% toward government services and phase out the relief and levy freeze rates by 2029. The State Budget Agency's 2027 certified distribution estimates show the current split: certified shares 1.2254% (which includes the levy freeze rate), public safety 0.5446%, IndyGo special purpose 0.25%, and property tax relief 0%.
For 2027, the Office of Finance and Management filed an ordinance with the budget that continues the shift. It proposes certified shares at 1.1003%, public safety at 0.5512%, and the levy freeze rate at 0.1185%, alongside the 0.25% special purpose rate for IndyGo that voters approved effective October 1, 2017. The total stays at 2.02%.

The budget book says this reallocation lets the city-county use prior-year supplemental income tax revenue that would otherwise sit in a stabilization fund. The city-county's income tax distribution is forecast at $554.4 million for 2027, up $40.7 million. The countywide 2027 certified distribution is $705,353,536. The City-County Council's final budget vote is covered in our 2027 budget post.

Where the money goes

The budget book's 2027 allocation table (as introduced) splits the countywide total of $629.4 million in certified shares, public safety, and levy freeze revenue as follows:

Recipient	2027 allocation
Consolidated County General	$279,008,517
Public Safety Income Tax Fund — City	$102,897,214
Public Safety Income Tax Fund — County	$76,965,454
County General	$50,033,362
Public Safety Communications	$25,000,000
Other city/county funds (IFD, IMPD, Solid Waste, Parks, Redevelopment)	$20,541,246
Health & Hospital Corporation	$10,587,162
Indianapolis Public Library	$4,621,932
IndyGo (levy freeze share)	$2,296,402
Other units	$57,420,592

The 0.25% IndyGo special purpose rate is separate. Its revenue goes to the county public transportation project fund (IC 6-3.6-7-27); the SBA estimates it at $87,174,886 for 2027.

What it costs a household

Because the rate did not change, SB 1 did not raise Marion County's LIT for 2026. Your county tax is 2.02% of your Indiana adjusted gross income after exemptions. DOR's withholding method subtracts $1,000 per personal exemption and, for most employees, $1,500 per qualifying dependent before applying the rate. Every $10,000 of taxable income costs $202 in county tax.

On the property side, a Marion homestead gets the SB 1 changes described in our $300 homestead credit walkthrough. Those are not offset by any 2026 LIT increase in Marion County. Renters get no direct property tax relief, but they did not face a LIT increase either.

Who pays Marion County's rate

People who live in Marion County on January 1. An Indiana resident pays the rate of the county where they lived on January 1 (IC 6-3.6-2-13; IC 6-3.6-8-3(b)). That holds even if they work in Hamilton, Hendricks, or any other Indiana county.
Out-of-state residents whose principal place of work is in Marion County on January 1. DOR tells employers to withhold the work county's rate only for employees who live outside Indiana.
Not Indiana residents of other counties who commute in. A Hendricks County resident working downtown pays Hendricks County's 1.7%, not Marion's 2.02%.

The tax applies to Indiana adjusted gross income, not just wages. Indiana AGI starts from federal AGI (IC 6-3-1-3.5), so pensions, interest, dividends, capital gains, and rental income are generally included. Social Security and Railroad Retirement benefits included in federal income are subtracted. A Marion retiree with pension and investment income pays the county rate on that income.

Homestead-relief LIT: not adopted

SEA 1 lets a county impose up to 0.3% to fund homestead credits (IC 6-3.6-6-3.1). After HEA 1210, it may not be imposed after December 31, 2028. Marion County has not adopted it; the SBA's 2027 certification has no such rate for any county. See our homestead-relief LIT explainer.

The 2029 horizon

The DLGF's July 17, 2026 memo says current LIT ordinances expire January 1, 2029, and new ones may be adopted starting July 1, 2028. Under the post-2028 IC 6-3.6-6-2:

The county may impose up to 1.2% for county services, 0.4% for fire and EMS, and 0.2% for nonmunicipal units (no more than 1.7% for those three), plus up to 1.2% for municipal services in towns that cannot or choose not to adopt their own rate. The total is capped at 2.9%.
Cities and towns with 3,500 or more residents may impose their own rate of up to 1.2% beginning after December 31, 2028 (IC 6-3.6-6-22).
Marion County's expenditure rate continues into 2029 only if the City-County Council adopts a renewal ordinance on or before October 1, 2028 (IC 6-3.6-3-4(c)).
The levy freeze rate is repealed effective January 1, 2029 (IC 6-3.6-11-1), and property tax relief rates end December 31, 2028.
Effective January 1, 2028, HEA 1210 provides that the IndyGo transit rate does not count toward the maximum rate (IC 6-3.6-7-27(c)).

What Marion County's combined rate will be in 2029 is not set. It depends on ordinances adopted in 2028 and on any changes in the 2027 legislative session. HEA 1210 also let counties convene a Municipal Unit Strategic Taskforce (MUST) before October 1, 2026 to negotiate the split. The budget book calls it an optional opportunity for Marion's LIT council members. We have not found a Marion MUST agreement. The DLGF must report all agreements to the Legislative Council before December 1, 2026.

What to do

Check your withholding. If you lived in Marion County on January 1, your employer should withhold at 2.02%. If you live in another Indiana county and work in Marion, withholding should follow your home county.
Model your household using your actual Indiana AGI and your home's assessed value. Marion's LIT did not change in 2026, so your SB 1 property-tax relief is not offset by a county income tax increase.
Confirm your homestead credit and deductions on your property tax bill. The $300 SB 1 credit, expanded supplemental deduction, and over-65 benefits (if eligible) are how the property side helps.
Follow the 2027 budget and LIT ordinance. Public testimony at City-County Council hearings matters.
Watch 2028. That is when the City-County Council and eligible cities and towns adopt the rates that take effect January 1, 2029. Our overhaul timeline lists every deadline.