Updated October 29, 2026. Quick answer: Partly. The 2025 IT-40 booklet lets a filer deduct “The lesser of the amount of taxable civil service annuity income” or $16,000, less Social Security and tier 1 and tier 2 Railroad Retirement income received, if the annuitant is at least 62 by year end.
What Indiana does with a FERS or CSRS annuity
| Question | What the Indiana documents say |
|---|---|
| What the source says | The 2025 IT-40 booklet lets a filer deduct federal civil service annuity income that is in federal adjusted gross income, up to a cap that is reduced by Social Security and tier 1 and tier 2 Railroad Retirement income received by that annuitant. |
| Amount or limit | Deduction code 601, reported on Schedule 2: the lesser of the taxable civil service annuity included in federal adjusted gross income or $16,000, less all Social Security and tier 1 and tier 2 Railroad Retirement income received by that annuitant. If a person receives an annuity both for self and as a surviving spouse, the combined deduction cannot exceed $16,000. |
| Age or other test | The annuitant must be at least 62 by the end of the tax year and/or a surviving spouse of a civil service annuitant; there is no age requirement for the surviving spouse. |
| Change for 2026 | No 2026 change to this deduction is printed in the state documents cited here. The booklet notes Indiana follows the Internal Revenue Code as of Jan. 1, 2023 and that the 2026 General Assembly may enact changes. |
In the Indiana documents’ own words
- “federal civil service annuity income. If it does, you may be eligible” (2025 IT-40 Full-Year Resident Individual Income Tax Booklet)
- “at least 62 years of age by the end” (2025 IT-40 Full-Year Resident Individual Income Tax Booklet)
- “included in federal adjusted gross income or $16,000,” (2025 IT-40 Full-Year Resident Individual Income Tax Booklet)
- “There is no age requirement for the surviving spouse.” (2025 IT-40 Full-Year Resident Individual Income Tax Booklet)
- “the deduction is equal to the entire amount of military retirement income” (2025 IT-40 Full-Year Resident Individual Income Tax Booklet)
- “you may be eligible to take a” (2025 IT-40PNR Part-Year and Full-Year Nonresident Individual Income Tax Booklet)
How this differs from other pensions in Indiana
The booklet’s civil service annuity deduction has its own $16,000 cap and Social Security offset, while its military retirement deduction is equal to the entire amount of military retirement income. The state documents cited here do not print a general private pension deduction comparable to the civil service annuity one. See also Does Indiana tax pensions? and military retirement pay.
FERS, CSRS and your TSP
The state documents cited here do not address TSP withdrawals. For the Thrift Savings Plan itself, see state tax on TSP withdrawals and the TSP calculator.
What the Indiana documents leave open
The Indiana Code section was not read, and the booklet passages cited here print no state tax rate. The booklet says civil service annuity and never names FERS or CSRS, and it does not address TSP, 401(k) or IRA withdrawals.
Common mistakes
- Applying the age 62 test to a surviving spouse. The booklet says there is no age requirement for the surviving spouse.
- Forgetting the Social Security offset. The deduction is reduced by all Social Security and tier 1 and tier 2 Railroad Retirement income received by that annuitant.
Related: Does Indiana tax pensions?, Indiana military retirement pay, Indiana retirement deduction line by line, and FERS, TSP and Social Security sequencing.
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Answer againSources
- 2025 IT-40 Full-Year Resident Individual Income Tax Booklet: https://forms.in.gov/Download.aspx?id=16915
- 2025 IT-40PNR Part-Year and Full-Year Nonresident Individual Income Tax Booklet: https://forms.in.gov/Download.aspx?id=16921
Read from the state documents linked above on October 29, 2026. General information, not tax advice.