Indiana · LLC tax election
Indiana LLC: S corp or C corp?
Indiana's corporate rate is roughly double the personal rate, which pushes most owners toward S.
See Indiana at a glanceShort answer
Indiana taxes a C corporation 4.9% and an S corporation nothing on ordinary profit, then taxes you at 2.95% for 2026 plus a county rate. With the personal rate well below the corporate one, S status usually wins on state tax if you take the profit out.
Last checked .Indiana at a glance
| Question | Indiana |
|---|---|
| S election recognized? | Yes, Indiana follows the federal election1 |
| Separate state form and deadline | none (file Form IT-20S; first-time filers enclose the IRS S-election approval letter)2 |
| Tax the S corp itself pays | Only on passive income and built-in gains, at 4.9%.3 |
| C corp rate and minimum | 4.9% flat4 |
| Entity tax on a default LLC | None for a default LLC5 |
| Personal income tax | Yes, on wages and pass-through income6 |
What is different about Indiana?
Indiana recently cut its personal rate to 2.95% for 2026, with a further step to 2.90% scheduled. The corporate rate has stayed at 4.9%. That gap is the story. An S corporation is exempt from the Indiana adjusted gross income tax on ordinary profit, so income is taxed once, on your return, at 2.95% plus your county's rate. A C corporation pays 4.9% first, and your dividends are taxed again. The exception: an S corporation still pays 4.9% on passive income and built-in gains. Your county matters too, since Indiana counties add their own income tax based on where you lived on January 1.
Does Indiana recognize a federal S corp election?
Indiana exempts an S corporation from its corporate adjusted gross income tax, except on passive income and built-in gains, which are taxed at 4.9%. You file Form IT-20S, and in your first year you enclose a copy of the IRS approval letter for the S election. There is no separate Indiana election. Shareholders pay at the individual rate, 2.95% for 2026, plus county tax, and nonresident shareholders carry withholding requirements.
Does my LLC need a separate Indiana election or form?
Indiana has no separate S election; a first-time Form IT-20S filer encloses the IRS approval letter.2
What does Indiana tax an S corp or LLC at the entity level?
Is a Indiana LLC taxed as a C corp ever better?
Indiana taxes C corporation adjusted gross income at a flat 4.9%. That is the figure in the 2025 booklet and we found no 2026 change. It is above the 2.95% personal rate for 2026, so the first layer here costs more than the individual rate would. Dividends then face tax a second time on your return.
Do any Indiana cities tax S corps differently?
- Your county of residence adds its own income tax on top of the state's rate.7
Run your Indiana numbers
Indiana's 4.9% against 2.95% means the S election tends to pay from the first profitable year, before payroll tax savings even count. Watch passive income and built-in gains, which keep the 4.9% rate, and remember the county tax applies to you either way.
Result
How much would a Indiana LLC owner save as an S corp?
| Taxed as | At $80,000 profit | At $150,000 profit |
|---|---|---|
| Default LLC | $11,304self-employment tax $11,304 + Indiana LLC tax $0 | $21,194self-employment tax $21,194 + Indiana LLC tax $0 |
| S corp | $9,344payroll tax $7,344 + Indiana S corp tax $0 + $2,000 payroll and prep | $15,770payroll tax $13,770 + Indiana S corp tax $0 + $2,000 payroll and prep |
| C corp | $17,303payroll tax $7,344 + Indiana tax $1,568 + federal $6,391 + $2,000 payroll and prep | $30,693payroll tax $13,770 + Indiana tax $2,940 + federal $11,983 + $2,000 payroll and prep |
Assumes a 60% salary9 and a single filer. Income tax is left out. C corp dividends are taxed again. Indiana taxes an S corp only on passive income and built-in gains, so it is $0 here.
When is the Form 2553 deadline for a Indiana LLC, and what if I miss it?
Late relief: federal steps, deadline guide.
What to do next
How to start one, or have us form it from $123.75.
Registered agent $74.25/yr, annual report.
LLC vs S corp guide, election deadline, Form 2553 filed for $165.
More on Indiana: How to start a Indiana LLC · How to start a Indiana corporation · Indiana LLC cost · Indiana annual report · Annual report late fees by state
File the S-Corp Election for your Indiana LLC
We file Form 2553 for a flat $165.
Get the S-Corp ElectionCommon questions
Does Indiana tax S corporations?
Generally no. Indiana's Form IT-20S instructions say S corporations are exempt from the adjusted gross income tax while the election is in effect, except on passive income and built-in gains.
What is the Indiana corporate income tax rate?
4.9% of adjusted gross income, per the 2025 corporate and S corporation booklets. We found no published change for 2026.
What is the Indiana individual income tax rate for 2026?
2.95%, scheduled to drop to 2.90% in 2027, according to the Department of Revenue. County income tax is added on top.
What form does an Indiana S corporation file?
Form IT-20S. First-time filers enclose the IRS letter approving the S election; the instructions also note that S elections cannot be made retroactively.
What is the Indiana county income tax?
A local income tax set by your county of residence on January 1, charged on top of the state rate. Counties can change rates in January and October.
Sources 10 links, checked Nov 6, 2026
- Indiana exempts S corporations from its corporate income tax, except on passive income and built-in gains. forms.in.gov, checked Nov 6, 2026
- Indiana has no separate S election; a first-time Form IT-20S filer encloses the IRS approval letter. forms.in.gov, checked Nov 6, 2026
- An Indiana S corporation pays 4.9% only on passive income and built-in gains, not on ordinary profit. forms.in.gov, checked Nov 6, 2026
- Indiana taxes C corporation adjusted gross income at a flat 4.9% (the rate in the 2025 booklet; no 2026 change found). forms.in.gov, checked Nov 6, 2026
- An Indiana LLC taxed as a partnership is not subject to income tax as an entity unless it makes a special election; an LLC classified as a corporation files Form IT-20. forms.in.gov, checked Nov 6, 2026
- Indiana taxes individuals at 2.95% for 2026, plus a county income tax set by where you live. in.gov, checked Nov 6, 2026
- Your county of residence adds its own income tax on top of the state's rate. in.gov, checked Nov 6, 2026
- IRS: Form 1120 instructions, C corp rate irs.gov, checked Nov 6, 2026
- IRS: S corp reasonable compensation irs.gov, checked Nov 6, 2026
- IRS: Form 2553 instructions irs.gov, checked Nov 6, 2026
Last verified Nov 6, 2026.
This page explains the rules; it is not tax advice. Run your numbers with a CPA or enrolled agent before you elect.
Last verified Nov 6, 2026.