Does Indiana tax retirement income?

Does Indiana tax Social Security?

Indiana does not tax Social Security benefits.

Indiana deducts any Social Security or Railroad Retirement benefits included in federal AGI, with no age or income limit.

Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.

Are pensions taxed in Indiana?

Pensions are taxed (state rate plus county tax); only federal civil service annuities get a deduction at 62+.

Indiana has no general pension or retirement exclusion. The federal civil service annuity deduction allows up to $16,000 at age 62 or older (a surviving spouse qualifies at any age), minus the Social Security and Railroad Retirement benefits you received. A separate disability retirement deduction also exists.

Public vs. private pensions: Private pensions are fully taxable; federal civil service annuities get the $16,000 deduction (minus Social Security).

Are IRA and 401(k) withdrawals taxed in Indiana?

IRA and 401(k) withdrawals are fully taxable.

There is no age-based retirement exclusion.

Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.

Is military retirement pay taxed in Indiana?

Military retirement pay is 100% deductible since 2022, at any age, including survivor benefits; Space Force, Public Health Service and NOAA Corps retirees were added in 2025.

What is Indiana’s income tax rate?

A flat 2.95%.

A flat 2.95% state rate for 2026 (3.00% in 2025), dropping to 2.90% in 2027. Every county adds its own local income tax — from 0.5% (Porter) to 3.0% (Randolph) as of October 1, 2026. A 2025 law (SEA 451) allows further cuts from 2030 if revenue conditions are met.

Standard deduction and exemptions

No standard deduction. Personal exemption: $1,000 per person, plus $1,000 for each filer 65+ and $1,000 if blind. Another $500 per person 65+ if federal AGI is under $40,000 ($20,000 married filing separately).

What tax breaks do seniors get in Indiana?

The extra $1,000 (and possibly $500) exemptions at 65+. The Unified Tax Credit for the Elderly, for people 65+ with federal AGI under $10,000: $100, $50 or $40 for a single filer (up to $140 when both spouses are 65+). The civil service annuity deduction at 62+.

What changed for 2026?

The state rate falls to 2.95% in 2026 and 2.90% in 2027. SEA 451 (2025, Public Law 80) allows further rate cuts from 2030 if conditions are met. County rates can change each January and October.

State rates for 2026 and 2027 are published by the Department of Revenue; county rates as of October 1, 2026.