Bank Gap by State
The Bank Gap in Indiana
Indiana pairs a low flat state income tax with one of the lowest costs of living in the country, and most Indiana counties add their own local income tax on top — a detail that's easy to miss when estimating the after-tax Bank Gap.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before IN tax
$1,005/yr
on a $25,000 balance
After IN 3.05% tax
$974/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Indiana's 3.05% top income-tax rate on the additional interest, you keep about $974. Because Treasury interest is exempt from Indiana income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After IN tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $195 |
| $10,000 | $38 | $440 | $402 | $390 |
| $25,000 | $95 | $1,100 | $1,005 | $974 |
| $50,000 | $190 | $2,200 | $2,010 | $1,949 |
| $100,000 | $380 | $4,400 | $4,020 | $3,897 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After IN tax" column applies IN's 3.05% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Indiana changes the math
Indiana's state income tax on interest is a flat 3.05%, but nearly every Indiana county layers on its own local income tax, which can add another 0.5 to 3 percentage points depending on where you live. Treasury interest is exempt from both the state and local components, widening the after-tax edge from T-Bills more than the state rate alone suggests.
One of the lowest costs of living in the country keeps typical Indiana emergency-fund targets modest, though the local income tax on interest is worth factoring in before assuming a fully taxable account is the simplest choice.
Cost of living in Indiana is among the lowest in the country, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Indiana taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Indiana tax high-yield savings account interest?
Is a high-yield savings account worth it in Indiana?
Are T-Bills better than a HYSA for Indiana savers?
Your personal Bank Gap
See exactly what the gap is costing you.
Enter your balance and current rate. The Rate Gap Calculator shows the gap per year and over five years.
Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.