Military Retirement Pay State Income Tax Exemption
100% of military retirement pay is excluded from Indiana adjusted gross income.
At a glance
- Benefit type
- Tax Benefits — Indiana
- Who it's for
- Veterans, Active Duty, Survivors
- VA rating needed
- No rating requirement
- Estimated value
- ~$885/year on $30,000 retirement pay
- Where it applies
- Indiana
- Last verified
- May 12, 2026
What is Military Retirement Pay State Income Tax Exemption?
Military Retirement Pay State Income Tax Exemption is a Indiana tax benefits benefit for veterans, active duty, survivors. 100% of military retirement pay is excluded from Indiana adjusted gross income. The listed value is ~$885/year on $30,000 retirement pay.
Who qualifies
- Available to any veteran
- Indiana residency
Who is eligible
Eligibility
Any military retiree receiving retired pay; includes all branches plus Space Force, USPHS, and NOAA officers. Active-duty pay is also 100% exempt as of tax year 2024 (the prior $5,000 cap no longer applies). Survivor Benefit Plan annuities also exempt. Must be an Indiana resident filing Indiana state taxes.
What Military Retirement Pay State Income Tax Exemption covers
Estimated savings
At Indiana's 2026 flat rate of 2.95% (declining each year), a retiree receiving $30,000/year saves roughly $885/year.
How to apply for Military Retirement Pay State Income Tax Exemption
How to apply
Claimed on Indiana state tax return (Form IT-40).
Verified information & sources
Last verified: May 12, 2026
Official source: in.gov
Compiled and fact-checked against the official source linked above. Benefit rules and dollar amounts change over time — always confirm current details at the official source before applying. A county Veterans Service Officer (VSO) is a free, accredited advocate who can review your eligibility and help you file at no cost.
Frequently asked questions about Military Retirement Pay State Income Tax Exemption
Who qualifies for Military Retirement Pay State Income Tax Exemption?▾
How much is Military Retirement Pay State Income Tax Exemption worth?▾
How do I apply for Military Retirement Pay State Income Tax Exemption?▾
Where can I verify Military Retirement Pay State Income Tax Exemption?▾
Other Indiana Tax Benefits
Property Tax Deduction -- Disabled Wartime Veteran ($24,960)
$24,960 deduction from assessed home value for wartime veterans with 10%+ disability rating.
$24,960 off assessed value
Disabled Veteran Homestead Deduction (Charitable Conveyance)
Property tax deduction equal to disability percentage applied to assessed value for homes donated by tax-exempt organizations.
Varies by disability % and home value
Property Tax Deduction -- 100% Disabled or Age 62+ with 10%+ ($14,000)
$14,000 additional deduction from assessed value for 100% disabled veterans OR veterans age 62+ with a 10%+ service-connected disability. Stackable with the wartime deduction.
$14,000 off assessed value (stackable)
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