Anderson local tax guide
Who pays Anderson's local tax
Madison County residents owe 2.25% on their full Indiana income, even if they drive to Indianapolis, Fishers, or Muncie every day. The reverse also holds: a worker who lives in Marion, Hamilton, or Delaware County and clocks in at an Anderson plant or warehouse pays their own county's rate, not Madison's. Only people who lived outside Indiana on January 1 are taxed by the county where they work, so an Ohio resident whose main job is in Anderson pays 2.25% on wages earned here.
Madison County's 2.25% local income tax
Anderson, a city of about 54,000 northeast of Indianapolis, has no municipal income tax. The local charge on paychecks is Madison County's Local Income Tax, set at 2.25% for 2026, a flat rate on the same Indiana adjusted gross income that the state taxes at 2.95%.
Because Indiana counties choose their own rates, Madison's is noticeably higher than many of its neighbors. Delaware County, home to Muncie, charges 1.5%, and Marion County charges 2.02%.
Worked example: $75,000 in Anderson
Take a single filer with a $75,000 salary. The federal government takes $7,670 in income tax, plus $4,650 for Social Security and $1,088 for Medicare. Indiana's tax comes to $2,183, and Madison County adds $1,665. That leaves $57,744 a year, about $4,812 a month.
With no county tax the same worker would keep $59,409, so Madison County residency costs $1,665 a year at this salary. At $40,000 the county tax is $878; at $150,000 it is $3,353, and take-home is $106,043.
The commuting math around Anderson
Many Anderson residents work in Indianapolis or the Hamilton County suburbs. Since Indiana taxes residents by home county, a move across the line changes the bill: at $75,000, a Madison County resident pays about $170 more than a Marion County resident, and $555 more than someone living in Muncie.
That gap runs the other way for people who work in Anderson but live elsewhere. A Muncie resident on an Anderson payroll pays Delaware County's 1.5%, or $1,110 at $75,000. See the Indianapolis calculator to compare.
Withholding and filing
Your employer withholds county tax based on Form WH-4, where you list your county of residence and county of principal employment as of January 1. If you moved into Madison County after January 1, file a new WH-4, but your old county's rate applies for the rest of the year.
The county tax is figured on your Indiana IT-40, on the same return as the state tax. Compare other cities on the Indiana take-home pay page.
Tips for Anderson paychecks
Weigh the county before you sign a lease
If you work in Anderson but are choosing where to live, a home in a lower-rate county such as Delaware lowers your local tax, since Indiana residents pay where they live.
Review WH-4 each January
Your county status is locked on January 1. A WH-4 that still shows an old county can mean under-withholding at Madison's higher rate.
Shelter income with a 401(k)
Pre-tax retirement deferrals reduce Indiana adjusted gross income, which saves the 2.25% county rate on top of the state and federal savings.