Updated October 16, 2026. Quick answer: Indiana’s Department of Revenue pages read describe no general exclusion for 403(b) or 457(b) withdrawals; the deductions they list are narrow, such as “you may be eligible for up to a $16,000 deduction” for a civil service annuity, and the rate for 2026 is 2.95%.
Indiana at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | The documents read describe no exclusion for these plans |
| Do the state’s documents name these plans? | The documents read name neither 403(b) nor 457(b) plans |
| Retirement exclusion or credit | Civil service annuity deduction of up to $16,000, with separate military and disability retirement deductions |
| Public-employee pension rule | The documents read list no deduction for state or local plans; the deductions listed are for federal civil service annuity income (up to $16,000, at age 62 or for a surviving spouse), military retirement income and disability retirement income |
| Rate in the documents read | 2.95% for 2026 |
| Changed for 2026? | The rate adjusts to 2.90% in 2027 |
What the Indiana documents say
The Department’s deductions page offers up to a $16,000 civil service annuity deduction, reduced by Social Security and railroad retirement income, at age 62 or for a surviving spouse. It says “Indiana does not tax Social Security and railroad retirement benefits”, which is a separate rule from retirement-plan distributions.
The Department’s rates page says “The Indiana Individual adjusted gross income tax rate for 2026 is 2.95%”, and that the rate “will adjust in 2027 to 2.90%”.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says that if you receive pension or annuity payments from a qualified employer retirement plan, “all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account”.
What the documents do not say
- The documents read do not name 403(b) or 457(b) plans and print no general retirement-plan exclusion.
- No Indiana statute is cited for the deductions in the documents read.
Common mistakes
- Assuming Indiana’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Indiana taxes 401(k) and IRA withdrawals, Indiana retirement taxes, whether Indiana taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- Indiana Department of Revenue: Deductions: https://www.in.gov/dor/i-am-a/individual/deductions
- Indiana Department of Revenue: Rates, Fees & Penalties: https://www.in.gov/dor/resources/tax-rates-and-reports/rates-fees-and-penalties
- IT-40 Booklet 2025: https://forms.in.gov/Download.aspx?id=16915
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.