Gary local tax guide
Who pays Gary's local tax
Anyone who lived in Lake County on January 1 owes the 1.5% county tax on all their Indiana income, including wages earned in Illinois. People who live in Porter County and work at the Gary steel mills pay Porter's rate, not Lake's. Illinois residents whose principal job is in Gary owe Indiana state tax plus Lake County's rate on those wages, because Indiana and Illinois have no reciprocity agreement. Residents of states that do have reciprocity with Indiana skip the state tax but still owe the county rate.
Lake County's tax in Gary
Gary, a city of about 69,000 on Lake Michigan's southern shore, levies no municipal income tax. The deduction on local pay stubs is Lake County's flat 1.5%, the same rate paid in Hammond, East Chicago, and Merrillville because all of them share one county.
The base is Indiana adjusted gross income, the same figure Indiana taxes at 2.95%. Pre-tax 401(k) deferrals shrink that figure, so they cut the Lake County bill along with the state one.
Worked example: $75,000 in Gary
For a single filer earning $75,000 at an Indiana job, federal income tax is $7,670, Social Security $4,650, Medicare $1,088, Indiana tax $2,183, and Lake County tax $1,110. Take-home pay is $58,299, or about $4,858 a month.
With no county tax that worker would keep $59,409, so Lake County costs $1,110 a year. Gary's 1.5% is lower than the 2.02% Indianapolis residents pay, a $385 difference at this salary.
Commuting from Gary to Chicago
Illinois taxes wages earned inside Illinois at a flat 4.95%, and with no reciprocity your Chicago employer withholds Illinois tax. You file an Illinois nonresident return, then claim Indiana's credit for taxes paid to other states on your IT-40. Because Illinois tax at $75,000 ($3,568) is larger than Indiana's ($2,183), that credit can cancel most or all of the Indiana state tax on those wages.
The credit stops at the state tax. It cannot reduce Lake County's 1.5%, so a Gary resident with a Chicago job still owes about $1,110 to the county at $75,000. Many Illinois employers withhold only Illinois tax, so ask payroll to withhold Indiana county tax or make quarterly payments on Form ES-40 to avoid a bill in April.
Compared with other Indiana cities
Lake County's rate matches Muncie's Delaware County, and it is $185 a year below South Bend's at $75,000. See the South Bend calculator, the Indiana state page, or compare Indiana with other states.
Tips for Gary paychecks
Chicago job: plan for the county bill
Illinois withholding does not cover Lake County tax. Set up Indiana county withholding with your employer or send ES-40 estimated payments.
File Illinois first
Complete your Illinois nonresident return before your Indiana IT-40, since the Indiana credit depends on the Illinois tax actually owed.
Porter County line matters
Living in Portage or Chesterton instead of Gary means paying Porter County's rate, not Lake's. Check the rate before you move.