Clear Money Guide
What this state guide covers
A quick view of the questions, practical details and source notes below.
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Updated July 28, 2026. Quick answer: Yes. Indiana taxes IRA and plan distributions in full with no general retirement exclusion, so a Roth conversion is taxed as ordinary income at the state rate on top of your federal bill.
The same question for annuity payments: does Indiana tax annuity income.
The same question for military retired pay: does Indiana tax military retirement.
The same question for gains from selling investments: does Indiana tax capital gains.
The same question for ordinary 401(k) and IRA withdrawals: does Indiana tax 401(k) and IRA withdrawals.
Why a conversion is a different question from a withdrawal
Almost every state summary answers “how does Indiana tax retirement income?” That is a question about distributions. A Roth conversion is not a distribution in the ordinary sense — it is a voluntary election to recognise income now in exchange for tax-free growth later. Whether a state’s retirement exclusion reaches that election is a separate question, and it is the one that decides your bill.
There is no exclusion to argue about here, which at least makes the maths clean: the converted amount is added to Indiana taxable income in the conversion year.
Because the state cost is certain, the lever that matters in Indiana is when and how much — splitting a conversion across tax years, or converting in a year of unusually low income, changes the bill in a way that arguing about the exclusion cannot.
What Indiana does with the converted amount
State income tax: flat 2.95% for 2026 (down from 3% in 2025; 2.9% scheduled 2027; possible 0.05-point trigger cuts beginning in 2030, to 2.85% if the first is triggered) plus county income taxes
How Indiana treats IRA and plan income: Pensions, 401(k), and IRA distributions fully taxable at the state and county level — no general retirement exclusion. Limited deductions exist for civil service annuities (up to $16,000, 62+, offset by SS) and railroad retirement.
| Conversion | State tax at 2.95% |
|---|---|
| $50,000 | $1,475 |
| $100,000 | $2,950 |
| $250,000 | $7,375 |
Straight arithmetic at the stated rate. It ignores deductions, credits, and any graduated bracket effects, so treat it as the ceiling rather than a filing figure.
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How our partner relationships workWhat to ask a preparer about Indiana
None on eligibility — it is taxable. Ask instead how splitting the conversion across two tax years changes the bracket outcome.
Converting around a move
Converting in the year you move into Indiana is the case that catches people. Residency at the moment of conversion is what generally determines which state gets to tax it, so a conversion executed a week before a move and one executed a week after can produce different bills.
Four separate taxes change when you move, not one: income tax on withdrawals, treatment of Social Security, estate tax, and inheritance tax. A state that looks good on conversions can be worse on the other three.
The state bill is the smaller half
Whatever Indiana does, the conversion is federal ordinary income first. The federal bracket you land in, and whether the conversion pushes you over an IRMAA threshold two years later, will usually move more money than the state line does. The state answer tells you whether to convert here; the federal answer tells you how much to convert at once.
Paying the tax from outside the account matters more than either. Using converted dollars to pay the bill shrinks the balance that was the entire point of converting.
Figures verified against the Indiana Department of Revenue rate and deductions pages, Information Bulletins 6, 26 and 27 and the legislative fiscal note for SB 451; IC 6-3-2-4 was not re-checked on September 30, 2026.
Sources
Authority: IC 6-3-2-4; Indiana DOR Information Bulletins IB26/IB27.
Compiled from state statutes, session laws and revenue-department publications and adversarially verified in July 2026. Dataset confidence for Indiana: high.
This page states what the cited authority says. It is not tax advice, and a conversion large enough to matter is worth putting in front of a preparer who can see your whole return.
Nearby states
A conversion taxed in full at the state level makes the size of the conversion the only lever you have. The Roth conversion state tax calculator takes your rate and the amount, shows the state bill against the federal one, and tells you what reaches the Roth depending on where you pay the tax from.