Updated September 4, 2026. Quick answer: Mostly yes. Indiana taxes public and private pensions and IRA/401(k) distributions the same as ordinary income, with one carve-out: a Civil Service Annuity Deduction of up to $16,000 for federal civil-service annuitants age 62+, reduced by Social Security received. Military retirement pay is fully exempt.
Confidence note: high. This page is scoped to pension, IRA and 401(k) taxation specifically. For the state’s full retirement-tax picture (Social Security, tax rates, estate and probate), see how Indiana taxes retirement income generally.
How pensions and retirement-account withdrawals are taxed
| Public (state/local government) pensions | Fully taxable, following federal adjusted gross income, with no general public-pension subtraction. |
|---|---|
| Private (employer) pensions | Fully taxable, same treatment as public pensions; no line in the state’s deduction schedule covers private pensions. |
| Federal government pensions (FERS/CSRS) | Partially exempt via the Civil Service Annuity Deduction: up to $16,000 per annuitant (age 62+, or a surviving spouse at any age), reduced dollar-for-dollar by Social Security and Railroad Retirement income received. |
| Military retirement pay | Fully exempt for 2022 and later (phased from 25% in 2019 to 100% in 2022); active-duty military wages, a separate and newer provision, became fully exempt starting 2024. |
| IRA and 401(k)/403(b) distributions | Fully taxable, following federal adjusted gross income, with no exclusion. |
| General retirement-income exclusion | An additional $1,000 exemption for age 65+ or blindness regardless of income, plus an additional $500 if federal AGI is under $40,000 (under $20,000 for married filing separately). |
Coordinate this with your overall retirement plan
An adviser can help weigh how much of a pension or IRA withdrawal to take this year, whether a Roth conversion makes sense before or after a move, and how state tax interacts with the rest of your plan, but that does not replace the numbers in your own return.
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Social Security
Social Security is never taxed by Indiana. Social Security has its own rules in every state; see the full breakdown in how Indiana taxes retirement income generally.
Statute and sources
Governing citation: IC 6-3-2-3.7 (civil service annuity), IC 6-3-2-4 (military retirement).
- Indiana Dept. of Revenue, 2025 IT-40 Booklet
- Indiana Dept. of Revenue, Income Tax Information Bulletin #6
Read September 4, 2026.
Related: how Indiana taxes retirement income generally · does Indiana tax Roth conversions? · Roth conversion taxes, all 51 jurisdictions.
General information drawn from each state’s own published statutes and revenue-department guidance, not legal, tax or financial advice. Figures and exemption amounts are current as of the date in the quick answer, are set by state law, and can change by future legislation; any pending bill named on this page is not yet law. This page cannot see your own return, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.