Updated October 5, 2026. Quick answer: Yes, with no general exclusion. Indiana’s 2025 IT-40 booklet takes out Social Security and railroad retirement and a few specific benefits, and it says “Do not enter any other types of pension or retirement” income on those lines.
More state retirement-income schedules, line by line: Indiana Schedule 2 retirement deductions.
How Indiana treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed as Indiana income; no general pension or annuity exclusion |
| Rate (2025 booklet) | The booklet prints no rate sentence; its credit worksheet applies “$300 ($10,000 multiplied by .03, tax due to Indiana)” |
| Deductions printed | “Indiana does not tax Social Security income or the railroad retirement”; a civil service annuity deduction (age 62 or older, up to $16,000 less Social Security and railroad retirement); military retirement income, deducted in full for 2022 and later |
| Annuities | The booklet names no deduction for a commercial annuity bought outside a government plan |
A $24,000 example
A stream of $24,000 in taxable annuity payments is $24,000 x 3% = $720 of Indiana tax at the booklet’s .03, before any other deduction or credit.
What changes in 2026
The booklet says Indiana follows the Internal Revenue Code as in effect on Jan. 1, 2023, and that the 2026 General Assembly may act; it prints no annuity-specific change.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Indiana taxes pensions, how Indiana taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- 2025 IT-40 Full-Year Resident Individual Income Tax Booklet (Indiana Department of Revenue): https://forms.in.gov/Download.aspx?id=16915
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.