Indiana Income Tax Deduction for Military Retired Pay and Survivor Benefits

IC 6-3-2-4, subsection (a), subdivision (2) gives an adjusted gross income deduction for "income from retirement or survivor's benefits" received by the individual or the surviving spouse for the individual's service in an active or reserve component of the armed forces. The amount is the lesser of the benefits included in adjusted gross income or $6,250 plus a percentage of the excess that rose from 25 percent in 2019 to "one hundred percent (100%)" for taxable years after 2021. In practice the whole of it has been deductible since 2022, with no age requirement. Who it covers. The statute names the Army, Navy, Air Force, Space Force, Coast Guard, Marine Corps, Merchant Marine, Indiana Army and Air National Guard and, since House Enrolled Act 1280 of 2025, the Public Health Service Commissioned Corps and the NOAA Commissioned Officer Corps. The Department of Revenue's Information Bulletin 6 of June 2025 dates that extension to January 1, 2025. What never reaches Indiana tax. VA disability compensation and dependency and indemnity compensation are not in federal adjusted gross income, so Indiana never sees them, and the same is true of military disability retired pay that federal law excludes. There is no Indiana tax on Social Security either. A separate $5,000. Subdivision (a)(1) adds a deduction for the first $5,000 of other income for military service, which matters mainly for pay not already excluded as qualified military income. See the military pay entry.