All-items parity
93.3
US = 100.0
Indiana (IN) | All-items parity 93.3
Indiana Cost of Living 2026
Indiana reads 93.3 on the BEA all-items price parity for 2024, with housing rents at a deeply affordable 73.9 against the national 100.6 and a median home of $243,500. The tax system is built for predictability: a flat state income tax of 2.95% that has been cut in steps, county income taxes layered transparently on top, and a constitutional cap holding homestead property tax to 1% of assessed value. Indianapolis is the cheapest of the big Midwest capitals, and the trade-off is a 7% sales tax.
Flat 2.95% state income taxHomestead cap: 1% of valueHousing parity 73.9
Median Home
$243,500
2BR rent $1,132/mo
Median Income
$71,959
Household, Census ACS
Category breakdown
The four BEA price parities vs the nation
| Category | IN index | National avg | Difference |
|---|---|---|---|
| All items | 93.3 | 100.0 | -6.7% |
| Services: housing rents | 73.9 | 100.6 | -26.5% |
| Goods | 95.5 | 99.6 | -4.1% |
| Services: utilities | 85.5 | 98.4 | -13.1% |
| Services: other | 99.1 | 100.1 | -1.0% |
U.S. Bureau of Economic Analysis publishes these four component parities and no others. There is no federal grocery, healthcare or transportation price parity, so this table shows none. Food at home sits inside Goods; medical and transport services sit inside Services: other.
Sources: BEA Regional Price Parities by State (table SARPP), 2024 reference year, U.S. Bureau of Economic Analysis. Census ACS 2024 1-year (median income, home value), Indiana Department of Revenue (state and county income tax), Tax Foundation (effective property tax), EIA (electricity rates), KFF (uninsured rate).
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Pros / offsets
What works in Indiana.
The property-tax cap is in the constitution. Indiana caps homestead property tax at 1% of gross assessed value (2% for other residential, 3% for business), a protection voters wrote into the state constitution in 2010. Whatever the market does, an owner-occupier’s ceiling is known in advance, and the effective rate in practice is 0.79%.
A low, flat, falling income tax. The state rate is a flat 2.95%, reduced repeatedly by statute over the past decade. Even with county income taxes added (commonly 1 to 2.5%), combined rates stay below most neighbors’ state-only brackets.
Housing among the cheapest for a metro state. At 73.9 on the rents parity and a $243,500 median home, Indiana prices below every neighbor except Kentucky, and Indianapolis is the rare million-plus metro where ordinary suburbs still sell in the low $200,000s.
Logistics-belt employment with short commutes. The crossroads-of-America freight economy (and a deep manufacturing base: Columbus, Fort Wayne, the Toyota and Subaru plants) spreads jobs across mid-size cities where a 20-minute commute is normal and parking is free.
Cons / drivers
Where Indiana costs more.
A 7% sales tax with no local relief valve. Indiana’s statewide 7% is among the highest base rates in the country, though it is uniform (no local stacking) and groceries are exempt. Big-ticket purchases cost noticeably more tax than in neighboring Kentucky or Michigan.
County income taxes vary and surprise. Every county levies its own income tax on residents, roughly 0.5% to over 3% depending on the county, collected through state withholding. The state’s flat 2.95% headline understates the real rate everywhere; always check the county before signing a lease.
Wages trail the national median. Median household income of $71,959 is modest, and parts of the manufacturing base remain cyclical. As in the rest of the cheap Midwest, locals feel the prices more than the index suggests; transplanted remote earners feel the discount.
Utilities lean coal-era expensive. Electricity at 14.18 cents per kWh and an average bill of $138 run above what the region’s cheap reputation implies, a legacy of aging coal plants retiring onto ratepayers; winter heating adds $78 a month averaged across the year.
Tax + benefit signals
Indiana tax and access overview
State income tax
2.95%
Graduated or flat
Property tax effective
0.79%
Of assessed value, annual
Sales tax (state)
7.00%
Local can add 1-4% more
Uninsured rate
7.6%
Medicaid: expanded
Your take-home pay in Indiana
Federal, Indiana and any local income tax on your salary, per paycheck.
The mortgage on a $243,500 home
Monthly payment at today’s rates with Indiana property tax (0.79%) and average home insurance.
Metro variation
State averages mask city variation.
Indiana averages 93.3 on the BEA all-items parity, and its markets cluster tightly around it:
Indianapolis metro: The cost center of gravity. Carmel, Fishers and Zionsville on the north side are the premium pocket (and perennial best-places list fixtures); Indy proper and the south-side suburbs remain among the cheapest big-metro housing in the nation.
Fort Wayne and Evansville: Mid-size manufacturing metros where median homes sit comfortably under $220,000; Fort Wayne in particular has drawn attention for affordability-led growth.
Bloomington and West Lafayette: The university towns run hotter on rent than their size suggests, student demand against limited stock, though they remain cheap by national college-town standards.
Northwest Indiana (the Region): Functionally Chicagoland at Indiana prices and Indiana taxes, the long-running arbitrage for South Side commuters via the South Shore Line.
No Indiana market is expensive nationally; the spread is between cheap and very cheap.
Frequently Asked
Indiana cost of living, answered
How does Indiana's property-tax cap work?
Since 2010 the Indiana constitution has capped property tax at 1% of gross assessed value for an owner-occupied homestead, 2% for other residential and farmland, and 3% for commercial property. Credits automatically enforce the cap when levies would exceed it. Combined with homestead deductions, the practical effective rate runs around 0.79%, and more importantly the worst case is known in advance, which is the real protection.
What income tax will I actually pay in Indiana?
Two layers: the flat state rate of 2.95%, plus your county's income tax, which ranges roughly from 0.5% to a bit over 3% (Marion County, home of Indianapolis, sits around 2%). A typical combined rate is 4 to 5.5%, still competitive with neighbors, but the county layer is mandatory and based on where you live on 1 January, so check the county rate before you move, not after.
Does Indiana tax Social Security or retirement income?
Social Security is exempt from Indiana income tax. Most other retirement income, private pensions, 401(k) and IRA withdrawals, is taxed at the flat state-plus-county rate, with modest deductions for military and certain public pensions. Because the flat rate is low, the retirement tax bill is small in absolute terms, but it is not the full exemption Illinois offers next door.
Is Indianapolis really the cheapest big Midwest metro?
It is consistently at or near the bottom for housing among million-plus Midwest metros: ordinary suburban family homes in the low-to-mid $200,000s, statewide median two-bedroom rent of $1,132, and no earnings tax of the kind Kansas City or St. Louis levy. Carmel and Fishers carry a genuine premium, but even they price below equivalent Chicago, Columbus or Minneapolis suburbs.
Why is the Indiana sales tax 7% and does anything escape it?
Indiana chose a high, uniform statewide rate instead of local stacking: 7% everywhere, with no county or city sales taxes on top. Groceries and prescription drugs are exempt; prepared food and nearly everything else is not, and some counties add a small food-and-beverage tax on restaurant meals. The uniformity makes it predictable; the level makes big purchases dearer than in Kentucky (6%) or Michigan (6%).
How do Indiana utilities and groceries compare?
Utilities are the quiet exception to Indiana's cheapness: electricity at 14.18 cents per kWh with an average bill of $138 runs above the Midwest norm as coal-era plants retire onto ratepayers. Groceries are ordinary: BEA publishes no grocery parity, food sits inside the goods parity (95.5 against a national 99.6), groceries are sales-tax exempt, and households average $382 a month.