Indiana retirement income tax (2026)

By the Deorbit Plan editorial team, a Berrydyne program · Last reviewed November 2026 · Topic: Taxes in retirement

Income tax: Flat 2.95%
Social Security: Exempt
Retirement exclusion: None modeled
Standard deduction: None
Personal exemption: $2,000 joint · $1,000 single
Capital gains: Taxed as ordinary income

How Indiana taxes retirement income

Indiana taxes income at one flat rate, 2.95%, whatever the amount and filing status^[1].

The simulator applies no Indiana standard deduction; it subtracts personal exemptions of $2,000 on a joint return ($1,000 single).

Social Security benefits are exempt from Indiana income tax: none of the benefit enters the state base, as in 22 of the 24 states covered here that tax income.

The simulator applies no retirement-income exclusion in Indiana: IRA and 401(k) withdrawals and pensions are taxed like other income. Any narrower break in state law that the simulator does not apply is listed under “What this page leaves out”.

Long-term capital gains and qualified dividends are taxed as ordinary income, at the same rates.

Put together, the example couple below owes $1,711 in Indiana, the 17th lowest of the 24 states covered here that tax income.

2026 rate

One rate, 2.95%, applies to all taxable income for every filing status; there are no brackets.

Worked example

A retired couple, both 67, filing jointly, with $48,000 of Social Security, $40,000 of IRA withdrawals and a $20,000 pension. The figures are computed when the page is built, by the same state-tax function the simulator runs.

Married couple, both 67, in Indiana
IRA / 401(k) withdrawals + pension	$60,000
Social Security in the state base ($48,000 received, $40,000 federally taxable)	$0
Less retirement exclusion	−$0
Less standard deduction	−$0
Less personal exemptions	−$2,000
Taxable in Indiana	$58,000
Indiana income tax	$1,711
Share of $108,000 gross income	1.58%

The couple’s next $1,000 of IRA withdrawals would add $30 of Indiana tax.

A single retiree, 67, with half those amounts ($24,000 of Social Security, $20,000 of IRA withdrawals, a $10,000 pension) owes $856, 1.58% of gross income, against the couple’s 1.58%.

Single filer, 67, in Indiana
IRA / 401(k) withdrawals + pension	$30,000
Social Security in the state base ($24,000 received, $11,300 federally taxable)	$0
Less retirement exclusion	−$0
Less standard deduction	−$0
Less personal exemptions	−$1,000
Taxable in Indiana	$29,000
Indiana income tax	$856
Share of $54,000 gross income	1.58%

Indiana state tax calculator

Filing statusAge (both spouses)Social Security benefits for the yearIRA / 401(k) withdrawalsPension or annuity incomeWages

Indiana income tax: $1,711 (1.58% of $108,000 gross income).
Taxable in Indiana: $58,000 (after $0 of retirement exclusion and $2,000 of deductions and exemptions).
The next $1,000 of IRA withdrawals would add $30.

Runs the same state-tax function as the Deorbit Plan simulator, with withdrawals and pension split evenly between spouses on a joint return. State tax only; federal tax and any local income tax are not included.

As IRA withdrawals rise

The same couple, with Social Security and the pension unchanged, taking more from their IRAs (a larger withdrawal, a required minimum distribution or a Roth conversion all count as distributions here):

Indiana tax for the example couple at higher IRA withdrawals
IRA withdrawals	Indiana tax	Share of gross income	Next $1,000 adds
$0	$531	0.78%	$30
$20,000	$1,121	1.27%	$30
$40,000	$1,711	1.58%	$30
$80,000	$2,891	1.95%	$30
$120,000	$4,071	2.17%	$30
$200,000	$6,431	2.40%	$30

Neighbouring states

The example couple’s state tax in Indiana and in the neighbouring states covered here, same income and ages:

Example couple’s state income tax, 2026
State	Income tax	Social Security	Couple’s tax	Difference
Indiana	Flat 2.95%	Exempt	$1,711	n/a
Illinois	Flat 4.95%	Exempt	$0	−$1,711
Michigan	Flat 4.25%	Exempt	$0	−$1,711
Ohio	2.75% above a 0% band	Exempt	$1,134	−$577
Kentucky	Flat 3.5%	Exempt	$0	−$1,711

Against Indiana, the couple would pay less in Illinois (−$1,711), Michigan (−$1,711), Ohio (−$577), Kentucky (−$1,711). With $200,000 of IRA withdrawals instead of $40,000, they would owe $6,431 in Indiana, against Illinois ($0), Michigan ($3,102), Ohio ($5,534), Kentucky ($5,287).

What this page leaves out

What the simulator does and does not handle for Indiana, item by item^[1]:

Flat 2.95% (2026: down from 3.0% in 2025, IC 6-3-2-1; 2027: scheduled to reach 2.9%).
$1,000/person exemption (senior add-ons ignored).
Social Security exempt.
IRA/401(k) fully taxed.
Mandatory county income taxes (avg ~1.7%) NOT modeled, which understates tax.

In every state the simulator also leaves out credits, itemized deductions, deductions that phase out with income, local income taxes, surtaxes and any deduction for federal tax paid. It holds state amounts fixed and does not index them for inflation.

See it over a full plan

Load the demo plan with Indiana as the state of residence and see the state tax line year by year, alongside federal tax, RMDs and Roth conversions. Open it in the simulator →

If you already have a saved plan, the link only takes you to the Household panel, where the state is set; your plan is not changed.

This page shows how the rules work. It is not financial, tax or investment advice. State law has details these pages leave out, so check the state’s own instructions or ask a tax professional before you act. See the disclaimer.

Sources

Verified November 11, 2026. The full verification record for this entry is in the sources ledger, with every other figure the simulator uses on the sources page.