Indiana retirement taxes at a glance (2026)
| State income tax | Flat 2.95%Indiana has a flat 2.95% state income tax for 2026, plus county income taxes of roughly 0.5% to 3%. |
|---|---|
| Social Security | Not taxedIndiana does not tax Social Security benefits. |
| Pensions | TaxedPrivate pension income is taxed at the flat state rate plus county tax. |
| 401(k) and IRA withdrawals | TaxedIRA and 401(k) withdrawals are taxed as ordinary income. |
| Government pensions | TaxedState and local government pensions are generally taxed. Indiana has a separate deduction for some federal civil service annuities, but its amount was not verified here. |
| Military retirement pay | Not taxedMilitary retirement pay is fully deductible. From tax year 2025 the deduction also covers Space Force, USPHS and NOAA Corps retirees. |
| Estate tax | No |
| Inheritance tax | NoIndiana has no inheritance tax. |
| Property tax help for seniors | Homeowners 65+ can claim an over-65 property tax deduction if they meet income and value limits (AGI under $40,000). Income tax filers 65+ may also get a $500 extra exemption if federal AGI is under $40,000. |
| Sales tax | Indiana has a 7% statewide sales tax and no local sales taxes. |
Recent changes and good to know
- State rate fell from 3.0% (2025) to 2.95% (2026) and is scheduled to fall to 2.90% in 2027.
- County income taxes apply on top of the state rate and some counties changed rates for 2026.
How to lower your retirement taxes in Indiana
- Mix your income sources. Roth IRA withdrawals are tax-free at the federal level and generally in Indiana too, so a Roth conversion before retirement can cut state tax later. Try the Roth conversion calculator.
- Watch federal Medicare costs. Large IRA withdrawals can raise your Medicare premiums. Check the 2026 IRMAA brackets.
- Think about your heirs. See what your IRA will really cost your family with the Family Tax Rate calculator.
- Comparing states? These have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Frequently asked questions
Does Indiana tax retirement income?
Partly: Indiana exempts Social Security and military pensions but taxes other pensions, IRAs and 401(k)s at a low flat rate plus county tax.
Does Indiana tax Social Security?
Indiana does not tax Social Security benefits.
Does Indiana tax pensions?
Private pension income is taxed at the flat state rate plus county tax.
Does Indiana tax 401(k) and IRA withdrawals?
IRA and 401(k) withdrawals are taxed as ordinary income.
Does Indiana tax military retirement pay?
Military retirement pay is fully deductible. From tax year 2025 the deduction also covers Space Force, USPHS and NOAA Corps retirees.
Does Indiana have an estate or inheritance tax?
Indiana has no inheritance tax.
Sources (last verified 2026)
- Rates, Fees & Penalties — Indiana Department of Revenue (2026)
- 2026 Tax Chapter for the 2025 Filing Year — Indiana Department of Revenue (2026)
- Indiana State Tax Guide — AARP (2026-03-23)
- Indiana Retirement Tax Friendliness — SmartAsset (2025)
Educational content only, not tax, legal or investment advice. Plans and tax laws change; confirm details with your employer's plan documents or your state revenue department. Smart Financial Lifestyle is not affiliated with any employer named on this site.