State retirement tax · Indiana
Retirement tax rules for Indiana residents (2026 guide)
Indiana's effective income-tax rate at retirement-bracket income is approximately 3.00%. Here's what it taxes, what it exempts, and how the worked numbers shake out.
Last reviewed May 3, 2026
Editorial review pending — see editorial process
Effective rate
3.00%
Taxes Social Security?
No
Approx. tax on $90k income
$1,800
Pension carve-outs
Yes
Indiana taxes income at an approximate effective rate of 3.00% for retirement-income brackets — low enough that most retirees treat it as a near-rounding-error after Social Security carve-outs. SS benefits are fully exempt at the state level, which removes one of the more error-prone parts of state retirement-tax planning.
What Indiana taxes (and what it doesn’t)
Indiana taxes retirement income (401(k) withdrawals, IRA withdrawals, pension payments) at the state's standard income-tax rate. Social Security benefits are FULLY EXEMPT from state tax — this matters because it can change your effective state-tax burden by 2-4 percentage points compared to a state that taxes SS.
State-specific note
Flat 3.0% (2026; was 3.05%). Local county taxes add 0.5–3% on top.
A worked example
Worked example. A Indiana retiree with $60,000 of pension and IRA withdrawals plus $30,000 of annual Social Security is taxed on the $60,000 of non-SS income only (SS is exempt). At the approximate 3.00% effective rate, that's about $1,800/year — roughly $150/month — owed to the state.
Should you relocate?
Indiana's low effective rate puts it in the second tier of retirement-friendly states — not as appealing as the no-tax states for headline savings, but typically with stronger public services and lower property/sales tax burdens that can equalise the picture.
See how Indiana state tax shapes your retirement plan
The calculator’s Taxes tab uses the 3.00% effective rate above and the SS-exemption flag automatically. Run your specific numbers and see the year-by-year tax forecast.
Run my numbers →Frequently asked
Does Indiana tax my Social Security?
No. Indiana fully exempts Social Security benefits from state income tax. You'll only owe state tax on non-SS retirement income (401(k), IRA withdrawals, pensions, brokerage gains).
What's the effective state tax rate on my retirement income?
Indiana's approximate effective rate for retirement-bracket income is 3.00%. For a $90k retirement income with $30k of Social Security, you'd owe roughly $1,800/year in state tax. Real liability varies with bracket structure, age-based exclusions, and pension carve-outs.
Should I relocate to Indiana for retirement?
It depends on the size of your retirement income, the destination state's effective rate, and your moving costs. The state-tax differential alone is rarely the decisive factor for normal-income retirees. For households with $1M+ retirement income, multi-year tax-arbitrage savings can exceed $20k/year — enough to drive the decision.
Are pension benefits taxed differently in Indiana?
Many states have specific carve-outs for pension income — particularly for public-sector pensions (teachers, firefighters, police, military). Flat 3.0% (2026; was 3.05%). Local county taxes add 0.5–3% on top. Yearfold's calculator uses an effective-rate approximation; real liability may be lower if you qualify for a pension exclusion.
Does this apply to property tax too?
No. This page covers state INCOME tax only. Property tax in Indiana is set by local jurisdictions (county / city / school district) and varies dramatically within the state. For a complete retirement-cost picture, consult your specific county's tax assessor.
Primary sources
Effective-rate and SS-taxation flags above are derived from these sources. We re-verify each annually.
Related reading
Louisiana retirement tax rules →
Comparable effective rate (3.00% vs 3.00%).
New Jersey retirement tax rules →
For perspective from a different tax tier.
Utah retirement tax rules →
An example of a state that DOES tax Social Security.
Run my numbers →
The calculator's Taxes tab uses the same per-state effective rate.
How the Monte Carlo actually works →
2,000-word methodology page — covers state tax modelling.