Retiring in Indiana: how your income is taxed
Indiana is less tax-friendly for retirees. On a typical retirement income it ranks #50 of 51 for the lowest state income tax.
The rules in Indiana
- Social Security: Indiana does not tax Social Security; taxable federal benefits are deducted on the state return.
- Pensions: Private pensions are taxed at Indiana's flat state rate plus county income tax. Federal civil service annuities get a separate deduction at 62 and older, reduced by any Social Security received.
- 401(k), 403(b) and IRA withdrawals: 401(k) and IRA withdrawals are fully taxable, with state plus county tax.
- At 65 and older: Each filer 65 or older gets an extra $1,000 exemption, plus $500 more when federal AGI is under $40,000.
Calculate your Indiana retirement taxes
State income tax in Indiana: $1,748 a year
In Indiana, the 401(k)/IRA amount counts as IRA withdrawals, which don't qualify for the pension exclusion. Enter withdrawals from employer plans such as a 401(k) or 403(b) as pension.
In Indiana you'd pay about $1,748 in state income tax and $4,336 in federal income tax on $70,000 of retirement income, keeping $63,916 (8.7% total).
Indiana ranks #50 of 51 for the lowest state tax on this income. 19 states charge no state income tax on this income.
What retirees pay in Indiana
| Retirement income | State tax (single) | State tax (married) | Federal tax (single) |
|---|---|---|---|
| $24,000 Social Security, $12,000 401(k)/IRA | $437 | $322 | $0 |
| $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA | $1,748 | $1,656 | $4,336 |
| $40,000 Social Security, $40,000 pension, $50,000 401(k)/IRA, $10,000 other income | $4,508 | $4,416 | $19,812 |
Age 67 or older, 2026 rules including the federal senior deduction. For married couples, income is the household total and both spouses are 67 or older. State estimates apply Indiana's main exclusions and may differ for income-tested credits.
States with lower retirement taxes
Moving to Indiana in retirement?
Compare the tax on your Social Security, pension and 401(k)/IRA income, and typical living costs, with the state you'd leave. These are the states most households moving to Indiana come from (IRS migration data, 2022–2023).
- Illinois to Indiana
- Florida to Indiana
- Kentucky to Indiana
- Ohio to Indiana
- Michigan to Indiana
- Texas to Indiana
Frequently asked questions
Does Indiana tax Social Security?
Not taxed. Indiana does not tax Social Security; taxable federal benefits are deducted on the state return.
Does Indiana tax pensions?
Taxed. Private pensions are taxed at Indiana's flat state rate plus county income tax. Federal civil service annuities get a separate deduction at 62 and older, reduced by any Social Security received.
Does Indiana tax 401(k) and IRA withdrawals?
Taxed. 401(k) and IRA withdrawals are fully taxable, with state plus county tax.
Is Indiana a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA, Indiana charges about $1,748 in state income tax, ranking #50 of 51 (lowest tax first).
Related
Sources: in.gov. Rules reviewed .