State-by-State Guide to Taxes on Retirees - Indiana
Tool | November 2019

State-by-State Guide to Taxes on Retirees

Indiana

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The Bottom Line
Flag of Indiana

Mixed Tax Picture

While the The Hoosier State exempts Social Security benefits and offers limited exemptions for military pensions and federal civil-service pensions, IRAs, 401(k) plans and private pensions are fully taxable. Keep in mind, too, that counties have the authority to levy their own income taxes on top of the state’s flat tax. Rates range from 0.35% (Jefferson County) to 3.38% (Pulaski County).

State Sales Tax

State levy of 7%.

Income Tax Range

The state has a flat rate of 3.23%.

Counties also have the authority to impose an income tax, instead of levying property taxes. Currently, all 92 counties have enacted a local option income tax, with an average rate of 1.56%, per the Tax Foundation.

Effective tax rate: 5.25% for single filers, 5.25% for joint filers.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Taxpayers age 62 and older can deduct up to $16,000 of income from a federal civil-service annuity (minus Social Security and Tier 1 Railroad Retirement benefits).

Starting in 2019, up to $6,250 of income from a military retirement plan, plus 25% of the amount received that exceeds $6,250, is exempt (previously, up to $6,250 was exempt). The exemption is gradually increased to a full exemption by 2022.

Railroad Retirement benefits are also exempt.

Property Taxes

In Indiana, residents pay an average of $907 in taxes per $100,000 of assessed home value.

Tax breaks for seniors: Homeowners 65 and older who earn $25,000 or less (combined for a married couple) are eligible to receive a tax reduction on property with an assessed value of $182,430 or less. The amount of the deduction is the lesser of one-half of the assessed value of the property or $12,480. The state also allows those 65 or older with an income under $30,000 ($40,000 for couples) to have increases in assessed value limited to 2% a year. This benefit is limited to properties with an assessed value below $160,000.

Vehicle Taxes

Sales tax is due on purchases. An annual excise tax is also levied, based on a car’s original MSRP and discounted for age. The amount due on a three-year old car that cost $20,000 would be $189.

Inheritance and Estate Taxes

None.

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