Most of what changes for a tradesperson in Indiana is set by the state, not Washington: how you get paid, whether you need to register, and what you owe in tax. Here is what actually differs, and where to run your own numbers.
Each section below points to a tool that runs your exact numbers for Indiana.
Tax in Indiana
Indiana has a flat 2.95% state income tax on top of your federal taxes. A flat rate makes the math simple: the same percentage applies whatever you earn. You still owe federal income tax and self-employment tax on your profit as well, and you make estimated payments to both the state and the IRS through the year.
On sales tax in Indiana, it turns on the contract type. A lump-sum price is treated as consumer, so you pay tax on materials at purchase; a time-and-materials price is treated as retailer, so you collect tax from the customer. Confirm it for your kind of job before you quote.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for Indiana.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a Indiana contractor paid, and in Indiana you generally have to record it within 60 days of your last day of work. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 1 year from recording the notice of intention, and if you do not sue in time the statute says the lien is void (32-28-3-6). WATCH THIS: the owner - or ANY party with an interest, expressly including a mortgagee or another lienholder - can serve written notice requiring you to foreclose. From receipt you have 30 DAYS to file or the lien is void (32-28-3-10). The debt survives; the lien does not. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (Ind. Code 32-28-3-1, 32-28-3-3, 32-28-3-6, 32-28-3-10).
On money held back as retainage, here is where Indiana lands:
- Private work: No statutory cap on private work in Indiana. Whatever your contract says governs, so read the withholding clause.
- Public work: 6% of the dollar value of all work satisfactorily completed. 3% of the dollar value of all work satisfactorily completed. 10% of the dollar value of all work satisfactorily completed where OPTION 1 of two, a band of no more than 10% and no less than 6%, held until the public work is 50% complete. Public works of $1,000,000 or more, other than universities. 5% of the dollar value of all work satisfactorily completed.
- Release: Private: no number of days is set at all. It falls due on whatever the contract says. Public: 61 days (the statute does not say whether these are calendar or business days) from the date of substantial completion.
- Prompt pay: On state work a contractor or escrow agent must pay each subcontractor and supplier its share within 10 days of receiving payment. Local government works differently: the board holds final payment until subcontractors are paid, and a subcontractor must file a claim within 60 days of its last work.
Check the size of the job before you check the percentage. Indiana's cap does not reach every contract. The condition on it, in the statute's own terms: OPTION 1 of two, a band of no more than 10% and no less than 6%, held until the public work is 50% complete. Public works of $1,000,000 or more, other than universities.
Whether the rule covers your job at all is a separate question from the percentage. Public, local government: OPTION 1 of two, chosen by the board at the outset. Public work contracts, generally over $200,000, excluding highways. Public, local government: OPTION 2 of two. Held continuously until the public work is substantially completed, with no halfway cut-off. Public, state agency: OPTION 2 of two, a band of no more than 5% and no less than 3%, held until the public work is substantially complete.
And the step-down is not the same thing as a right. Indiana cuts the rate to 0% when the public work is 50% completed, after which nothing further is withheld. That drop is automatic once the condition is met, so it is money you are entitled to have back before the end of the job. No reinstatement provision. But note this is only what happens IF the board elected option 1; it is not a right that attaches to option 2.
Heads up: INDOT highway work is different again: IC 8-23-9-17 sets no percentage and no release period, and lets the department pay out part of the retained sum after substantial completion at its own discretion, on written request.
Check the Retainage Calculator before you sign a contract that holds back more.
Free Indiana retainage letters
Three letters written for Indiana's rules, with the state's own release clock and its statutory citation already in them. Fill one in on screen and download it as a PDF or a Word file.
- Retainage Release Request (Indiana), for when the job is done and the money has not come back
- Retainage Overdue: Demand for Payment (Indiana), for when the release date has passed and nothing has arrived
- Retainage Held Above the Cap: Challenge Letter (Indiana), for when more is being held than the state appears to permit
Do you need a license in Indiana?
Indiana has no statewide general contractor license, so for most building work there is no state license to get. That is one of the things that makes Indiana straightforward to start in. It does not mean no rules at all: the state still licenses specific trades like electrical and plumbing, and your city or county can require its own registration or permits, so always check locally before you take a job on.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
Indiana adopts its building codes statewide, so the rules travel with you across the state. Editions still move, so confirm yours with the building department before you price a job.
- Homes: 2018 (published as the 2020 Indiana Residential Code) / 2012 IBC for commercial (published as the 2014 Indiana Building Code)
- Electrical: 2008 commercial (published as the 2009 Indiana Electrical Code) / 2017 via the 2018 IRC for one- and two-family dwellings
- Energy: ASHRAE 90.1-2007 for commercial (published as the 2010 Indiana Energy Conservation Code) / 2018 IECC provisions for dwellings, in Chapter 11 of the residential code
- Plumbing: 2006 IPC (published as the 2012 Indiana Plumbing Code)
Indiana does not run one edition across the whole job, and the electrical code is where it splits: 2008 commercial (published as the 2009 Indiana Electrical Code) / 2017 via the 2018 IRC for one- and two-family dwellings. That matters more than the number itself. If you work on houses, the residential edition is your book, and the single figure quoted in most adoption charts is the commercial one.
Indiana splits residential from commercial in three of its four families, and in every case the figure a chart publishes is the commercial one. Houses run the 2018 IRC with its own electrical and energy chapters; commercial runs a 2012 IBC, a 2008 NEC and ASHRAE 90.1-2007. Every family also carries a state edition year ahead of the model code underneath, so build to the Indiana designation. Local authorities may add administrative provisions only, never substantive amendments, so the state rule is the law everywhere. HEA 1003 of 2026 abolished the commission that adopts these codes and moved the function to the Department of Homeland Security, and bans mandatory arc-fault protection requirements from 1 July 2026.
Source: 675 IAC 14-4.4 (residential, effective 26 December 2019); 675 IAC 13-2.6 (building, effective 1 December 2014); 675 IAC 17-1.8 (electrical, effective 26 August 2009); 675 IAC 19-4 (commercial energy, effective 6 May 2010); 675 IAC 16-1.4 (plumbing, effective 24 December 2012); HEA 1003 (2026), Public Law 152. Read against that source on 2026-08-25.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in Indiana is the federal $7.25 an hour. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
Workers' comp rates in Indiana are not published as a single figure; they turn on your trade's class code and your payroll. Get a realistic range on the Workers' Comp Estimator, then get a real quote.
If a client will not pay
If a client will not pay, you can sue for up to $10,000 in Indiana's Circuit/Superior Court, small claims. That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 10 years to sue you over the work under a written contract in Indiana, with an absolute cutoff 10 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
How much state income tax will I pay in Indiana?
Indiana has a flat 2.95% state income tax on your profit, on top of federal income tax and self-employment tax. Use the Tax Set-Aside Calculator to see what to hold back.
Do I need a contractor's license in Indiana?
For most general building work, no. Indiana has no statewide general contractor license. The state still licenses specific trades and your city or county may require its own registration, so check both.
What is the small claims limit in Indiana?
You can sue for up to $10,000 in Indiana's Circuit/Superior Court, small claims. The filing fee is typically $85 to $100. Larger claims go to regular civil court.
How long do I have to file a mechanic's lien in Indiana?
Generally 60 days from your last day of work. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
Are there free Indiana contract and payment forms?
Yes. This page links 3 retainage letters written to Indiana's own release clock and carrying its statutory citation. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
What is the minimum wage in Indiana?
$7.25 an hour, the federal floor. Check a specific job on the minimum-wage tool.
What building code does Indiana use?
Indiana adopts statewide. Homes: 2018 (published as the 2020 Indiana Residential Code) / 2012 IBC for commercial (published as the 2014 Indiana Building Code). Electrical: 2008 commercial (published as the 2009 Indiana Electrical Code) / 2017 via the 2018 IRC for one- and two-family dwellings. Editions move, so confirm yours with the building department before you price a job.
The honest bit
These are the 2026 rules for Indiana as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the Indiana tax and licensing agencies, and your local building department) or with a professional. Where Indiana does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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