Military Retirement Pay State Income Tax Exemption
100% of military retirement pay is excluded from Indiana adjusted gross income.
Apply now
Apply directly through the official Indiana agency.
About this benefit
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.
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
Claimed on Indiana state tax return (Form IT-40).
Verified against official source
Last checked 2026-05-05 against www.in.gov. Always confirm current rates and rules with the Indiana state agency before applying.
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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