Indiana taxes capital gains as ordinary income — up to 2.95% — stacked on top of federal tax, so selling appreciated real estate can cost roughly ~26.8% of the gain. A 1031 exchange into a Delaware Statutory Trust lets Indiana investors defer that combined bill and trade active landlording for passive institutional real estate.
The Indiana tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Indiana income tax (2.95%) | $44,250 |
| Total if you simply sell | $401,250 |
| Tax if you 1031 into a DST | $0 deferred |
In Indiana's top bracket, roughly the combined rate above goes to tax if you sell outright — versus $0 now with a qualifying 1031 exchange. Run your Indiana numbers →
Indiana 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Indiana conforms to IRC §1031, so a qualifying exchange defers Indiana tax as well as federal tax.
Withholding at sale
Indiana may require nonresident withholding at closing; a qualifying 1031 exchange generally defers it. Confirm specifics with your closing agent.
How gains are taxed
Taxed as ordinary income — up to 2.95%.
Indiana market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Indiana
Realized (acquired, held, sold) programs on Indiana assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Hampton Inn – Corydon, IN — Corydon | Peachtree Group | 4.70% | 1.36x | 7.32 yr |
| Fairfield Inn & Suites – Indianapolis, IN — Indianapolis | Peachtree Group | 13.50% | 3.32x | 11.68 yr |
| Autumn Breeze — Noblesville | Passco | 7.53% | 1.66x | 7 yr |
| Marriott TownePlace Suites — Indianapolis | Syndicated Equities | -12.54% | 0.45x | 5.96 yr |
| Marriott Courtyard — Indianapolis | Syndicated Equities | -54.60% | 0.07x | 3.37 yr |
| Deercross Apartments — Indianapolis | Bluerock | 11.31% | 1.14x | 1.33 yr |
| Social Security Administration — Valparaiso | Syndicated Equities | 1.41% | 1.20x | 12.98 yr |
| Social Security Administration — Fort Wayne | Syndicated Equities | 3.42% | 1.53x | 12.66 yr |
See every Indiana deal in the Data Center →
Current offerings for Indiana investors
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Indiana FAQ
What is the capital gains tax rate in Indiana?
Indiana taxes capital gains as ordinary income, up to 2.95%, with no separate long-term rate. Combined with the federal 20% rate and the 3.8% net investment income tax, a high-bracket Indiana seller can face roughly ~26.8% on a real estate gain.
Does Indiana recognize 1031 exchanges?
Yes. Indiana conforms to IRC §1031, so a properly structured exchange defers Indiana tax as well as federal tax.
Why use a 1031 exchange in Indiana?
To defer the tax on a large gain (up to about ~26.8% combined) and move from active landlording into passive, professionally managed real estate while keeping your full equity invested. These are Regulation D offerings for accredited investors.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.