Does Indiana Tax Retirement Income?

No. Indiana does not tax Social Security benefits.

Social Security and Tier 1 Railroad Retirement benefits included in federal AGI are deducted in full, so Indiana does not tax them.

The Indiana answer is separate from the federal one. Depending on combined income, up to 85% of Social Security benefits can be taxable on the federal return regardless of what Indiana does, so the state rule changes the state line only. Our guide to states that do not tax Social Security shows where Indiana sits among the states that still tax benefits.

Yes. Indiana generally taxes pension income.

Private and most public pension income is fully taxable at the flat state rate plus the county rate. The main carve-out is a civil service annuity deduction of up to $16,000 for federal civil service annuitants age 62 and older, reduced dollar for dollar by Social Security and Tier 1 Railroad Retirement benefits received.

There is no general age- or income-based retirement exclusion. The targeted breaks are the Social Security deduction, the full military retirement deduction, and the capped civil service annuity deduction.

Public and private pensions, annuities, and retirement-plan distributions do not always get the same treatment. The pension comparison lists which states exempt pensions broadly, partly, or only for certain plans.

Yes. Indiana generally taxes traditional 401(k) and IRA withdrawals.

Traditional 401(k) and IRA withdrawals are fully taxable. Indiana offers no age-based deduction or exclusion for retirement account distributions.

Two timing points matter in Indiana. A Roth conversion is taxable in the year it is done, and Indiana starts from federal adjusted gross income, so a large conversion can land in a year when the state exclusion does not cover it. Qualified Roth withdrawals later are generally not taxable at either level. Required minimum distributions follow the same Indiana rules as any other traditional-account withdrawal.

Every state page on this site runs the same retiree profile so the states can be compared: $30,000 of Social Security, $40,000 withdrawn from a traditional 401(k), and a $20,000 private pension, $90,000 in total.

A 68-year-old with $30,000 of Social Security, $40,000 from a 401(k), and a $20,000 private pension pays no Indiana tax on the Social Security but generally owes tax on the full $60,000 of account and pension income. At the 2.95% state rate that is about $1,770, plus county tax of roughly $300 to $1,800 depending on the county, before exemptions.

Indiana starts from federal AGI of about $85,500 and deducts the $25,500 of federally taxable Social Security, leaving $60,000 of 401(k) and private pension income. There is no retirement exclusion for that $60,000; after the personal exemption and the age-65 exemption, roughly $58,000 is taxable. State tax at 2.95% is about $1,710. County tax on the same $58,000 adds roughly $290 in Porter County (0.5%), about $1,170 in Marion County (2.02%), and about $1,740 in Randolph County (3.0%), so the combined bill runs from roughly $2,000 to $3,450 depending on the county. Contrast: a $150,000 lump-sum IRA withdrawal adds a flat $4,425 of state tax plus $750 to $4,500 of county tax, since Indiana has no brackets to climb and no cap to exhaust, and the only real lever is which county the retiree lives in on January 1.

The same $90,000 profile looks different a state line away. The rows below come from the reviewed 51-state table; each state name links to its own guide.

• Illinois: treats Social Security as exempt, pensions as exempt, and 401(k) and IRA withdrawals as exempt, with a top rate of 4.95% and qualified retirement income is subtracted.
• Ohio: treats Social Security as exempt, pensions as taxed, and 401(k) and IRA withdrawals as taxed, with a top rate of 2.75% and retirement-income and senior credits may apply.
• Michigan: treats Social Security as exempt, pensions as partially taxed, and 401(k) and IRA withdrawals as partially taxed, with a top rate of 4.25% and 2026 subtraction up to $67,610 single or $135,220 joint.

Indiana's pitch to retirees is simplicity and a falling rate, 2.95% in 2026 and scheduled to reach 2.9% in 2027, not targeted exclusions. The county income tax is the piece out-of-state comparisons routinely miss, since it applies to retirement income and ranges from under 1% to about 3%.

Military retirement: Military retirement pay and survivor benefits are fully deductible from Indiana adjusted gross income for 2022 and later years. See the military retirement tax map for every state's treatment.

Estate and inheritance tax: Indiana has no estate tax, and its inheritance tax was repealed for deaths after 2012.

Selling a home or investments in Indiana: retirement-income rules do not cover capital gains. See Indiana capital gains tax before selling appreciated property or a brokerage position in the year you move or retire.

• Confirm the exclusion you are claiming. There is no general age- or income-based retirement exclusion. The targeted breaks are the Social Security deduction, the full military retirement deduction, and the capped civil service annuity deduction.
• Part-year residents. If you moved into or out of Indiana during the year, retirement income is generally allocated to the period of residency, and the former state may still tax distributions received before the move. Document the move date, the new domicile, and where each distribution was received.
• Withholding and estimates. Pension and IRA custodians often withhold federal tax but not Indiana tax. If Indiana taxes any part of your retirement income, check whether quarterly estimated payments are needed to avoid an underpayment penalty.
• Federal side. The federal return has its own rules: up to 85% of Social Security can be taxable, the temporary $6,000 federal senior deduction is available for 2025 through 2028 subject to income limits, and Roth conversions are taxed in the conversion year. State exemptions do not change any of that.
• Large one-time distributions. Where you live inside Indiana changes the bill. County rates apply to the same taxable base as the state rate, so a retiree in a high-rate county can pay roughly double the state-only figure. Model the combined rate, not the headline 2.95%.

Comparing states before a move? Use the retirement taxes by state table and the moving states tax guide, and read retirement tax planning for how distributions, conversions, and a move are sequenced together.