On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — Indiana takes $1,770 a year in state income tax.
That is the number people compare, and it is the smallest of three. Property tax adds about $2,128 on the state's $280,055 median home, and insurance another $2,985. The three together come to $6,883, placing Indiana 21st of 50.
A note before you start. This is general education, not tax advice. Every Indiana figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2026. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.
1. What Indiana takes from retirement income
| Income stream | Indiana tax |
|---|---|
| Social Security | $0 on $40,000 |
| 401(k), 403(b), 457(b), traditional IRA | $1,770 on the typical profile |
| Private employer pension | $1,446 on $50,000 |
| Public and federal government pension | $974 on $50,000 |
| Military retired pay | $0 on $50,000 |
On Social Security. Fully exempt with no threshold, no phase-out and no age condition. Indiana begins from federal AGI, so any federally taxable portion of benefits enters the Indiana base and is then removed: all Social Security benefits and Railroad Retirement Board benefits included in federally taxed income are deducted on the Indiana return.
On 401(k) and IRA distributions. Taxed in full at the 2.95% state rate plus the county rate. Indiana offers NO general deduction for distributions from a 401(k), 403(b), or traditional IRA. This is the single most consequential contrast with Indiana's neighbours: Illinois exempts these distributions entirely and Iowa exempts them for anyone 55 or older, while Indiana taxes them from the first dollar at every age. The narrow deductions Indiana does offer are for federal civil service annuities and for military retirement pay - see pensions - and neither reaches an ordinary private-sector retirement account.
2. The rule that decides your Indiana bill
Three genuinely different answers, and collapsing them would be wrong in both directions. private pensions are fully taxed; Indiana has no private pension deduction. military retirement is fully exempt with no age condition and no cap: for tax year 2022 and later the deduction equals the entire amount of military retirement income and/or survivor's benefits, so a 42-year-old Indiana military retiree pays nothing on that income while a 70-year-old with a private pension pays the full state and county rate on all of it. public is the partial case and its scope is narrower than the label implies. The Civil Service Annuity Deduction is available to a taxpayer aged 62 OR older (a surviving spouse may claim it at any age) and equals the lesser of $16,000 or the taxable civil service annuity income, minus all Social Security and Tier 1 and Tier 2 Railroad Retirement income received. That offset commonly reduces the deduction to nothing: a retiree with $16,000 or more of Social Security has no civil service deduction left. A taxpayer claiming both their own annuity and a survivor annuity is capped at $16,000 combined, not $16,000 each.
Indiana is a low-headline-rate, low-relief state for retirees: the 2.95% flat rate is among the lowest in the country, but almost no retirement income escapes it except Social Security and military pay, and the county tax applies on top of whatever remains.
3. What Indiana charges at three income levels
The same state, three retirements. All figures are for a single filer aged 70.
| Profile | Income | Indiana tax | Effective rate |
|---|---|---|---|
| Modest | $24,000 Social Security + $31,000 distributions | $885 | 1.6% |
| Typical | $34,000 Social Security + $61,000 distributions | $1,770 | 1.9% |
| Affluent | $40,000 + $100,000 + $40,000 other | $4,100 | 2.3% |
The marginal rate at the typical profile is 3%. That is what an extra dollar of distribution costs — a larger number than the 1.9% effective rate, and the one that matters when deciding how much to withdraw.
A married couple with $48,000 of Social Security and $62,000 of distributions pays $1,770.
Run your own income against Indiana and every other state4. Property tax, and why it lands harder in retirement
An effective rate of 0.8% on the state's $280,055 median home is about $2,128 a year.
For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.
It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.
Indiana does have a homestead provision, and it is the one lever on this line worth understanding.
Indiana's Homestead Standard Deduction (Indiana Code §6-1.1-12-37) reduces a homestead's assessed value by the lesser of 60% of assessed value or a flat dollar cap — but that cap is being phased down and eliminated under 2025 property tax reform (P.L.68-2025 / the enacted version of Senate Bill 1): $48,000 for 2025, $40,000 for 2026, $30,000 (2027), $20,000 (2028), $10,000 (2029), and $0 (2030 onward). A separate Supplemental Homestead Deduction (IC §6-1.1-12-37.5) applies to the remaining assessed value after the standard deduction, and is being phased UP over the same period to partially offset the standard deduction's phase-out: 40% (2026), 46% (2027), 52% (2028), 57% (2029), 62% (2030), 66.7% (2031 onward), capped so the combined deductions never exceed 75% of gross assessed value. Both deductions require a one-time application with the county auditor. Separately, Indiana's constitutional 'circuit breaker' property tax caps (Art. 10, §1) limit a homestead's total property tax bill to 1% of gross assessed value (2% for other residential/agricultural, 3% for other real/personal property), regardless of deductions.
Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.
5. Insurance, the line nobody prices
Average home insurance in Indiana: $2,985 a year — 32nd cheapest of the fifty states.
This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.
For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.
6. What retiring in Indiana actually costs
Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. Indiana is shown against its own neighbours in the ranking, and against the extremes.
| State | Income tax | Property tax | Insurance | Total |
|---|---|---|---|---|
| Wyoming | $0 | $2,083 | $1,900 | $3,983 |
| Nevada | $0 | $2,489 | $2,025 | $4,514 |
| New Mexico | $1,701 | $2,249 | $2,800 | $6,750 |
| Kentucky | $929 | $2,099 | $3,795 | $6,823 |
| Washington | $0 | $5,191 | $1,650 | $6,841 |
| Indiana | $1,770 | $2,128 | $2,985 | $6,883 |
| Alabama | $2,785 | $1,072 | $3,140 | $6,997 |
| Idaho | $2,247 | $2,517 | $2,240 | $7,004 |
| Iowa | $0 | $3,275 | $3,765 | $7,040 |
| Minnesota | $4,937 | $3,750 | $3,615 | $12,302 |
| Connecticut | $4,475 | $8,779 | $2,690 | $15,944 |
Indiana comes to $6,883, 21st of 50.
Income tax is 26% of that total. It is the line every comparison leads with and, here, not the largest of the three.
One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.
7. Whose pension it is changes the bill
Indiana does not tax all pensions the same way. The same $50,000 costs $1,446 if it is a private employer pension and $974 if it is a government one. Three genuinely different answers, and collapsing them would be wrong in both directions. private pensions are fully taxed; Indiana has no private pension deduction. military retirement is fully exempt with no age condition and no cap: for tax year 2022 and later the deduction equals the entire amount of military retirement income and/or survivor's benefits, so a 42-year-old Indiana military retiree pays nothing on that income while a 70-year-old with a private pension pays the full state and county rate on all of it. public is the partial case and its scope is narrower than the label implies. The Civil Service Annuity Deduction is available to a taxpayer aged 62 OR older (a surviving spouse may claim it at any age) and equals the lesser of $16,000 or the taxable civil service annuity income, minus all Social Security and Tier 1 and Tier 2 Railroad Retirement income received. That offset commonly reduces the deduction to nothing: a retiree with $16,000 or more of Social Security has no civil service deduction left. A taxpayer claiming both their own annuity and a survivor annuity is capped at $16,000 combined, not $16,000 each. This is the distinction most published comparisons flatten. A state described as exempting pension income may exempt only the government kind — and a private-sector career is the case most states treat least generously.
8. What a Roth conversion costs in Indiana
Converting $50,000 to a Roth costs an extra $1,475 in Indiana tax — 3 cents on the dollar.
| Converted | Extra Indiana tax | Cost per dollar |
|---|---|---|
| $50,000 | $1,475 | 3% |
| $100,000 | $2,950 | 3% |
These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.
The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 3%. The federal tax is due either way.
9. What part-time work costs here
$20,000 of part-time work costs an extra $590 in Indiana tax — an effective 3% on the earnings.
Compare that with the 3% a Roth conversion costs. The state treats the two identically, which keeps the decision a non-tax one.
Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.
10. The order to draw your accounts in
The order you draw accounts in is worth real money, and the right order depends on the state.
Indiana applies the same treatment whenever you withdraw, so the order is a federal question rather than a state one — with the exception that the marginal rate is 3%, and a year of unusually high withdrawals pays that on the excess.
Smoothing withdrawals across years therefore beats lumping them, modestly. Take a large one-off distribution in a single year and it climbs the bracket schedule; spread the same amount over three and more of it stays low.
Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.
11. Or move across the state line
For most people the real alternative to Indiana is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.
| State | Income tax | Property tax | Insurance | Total | Rank |
|---|---|---|---|---|---|
| Michigan | $0 | $3,569 | $2,415 | $5,984 | 9 |
| Ohio | $961 | $3,339 | $2,080 | $6,380 | 15 |
| Kentucky | $929 | $2,099 | $3,795 | $6,823 | 19 |
| Indiana | $1,770 | $2,128 | $2,985 | $6,883 | 21 |
| Illinois | $0 | $6,331 | $2,060 | $8,391 | 31 |
Michigan is the cheapest of the group at $5,984, $899 below Indiana. Whether that is worth a move is a question about your life rather than your spreadsheet — but it is the comparison worth running, because it is the one you could actually act on.
One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.
12. If you are moving to Indiana from somewhere else
The eight most populous states people leave, measured against Indiana on the same three lines.
| Moving from | Their total | Indiana | Difference |
|---|---|---|---|
| California | $9,520 | $6,883 | $2,637 cheaper |
| Texas | $9,745 | $6,883 | $2,862 cheaper |
| Florida | $11,690 | $6,883 | $4,807 cheaper |
| New York | $10,287 | $6,883 | $3,404 cheaper |
| Pennsylvania | $6,465 | $6,883 | $418 dearer |
| Illinois | $8,391 | $6,883 | $1,508 cheaper |
| Ohio | $6,380 | $6,883 | $503 dearer |
| Georgia | $6,033 | $6,883 | $850 dearer |
Indiana is cheaper than 5 of these eight. Which means the answer genuinely depends on where you are starting from.
A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.
Indiana charges no transfer tax on the purchase, which is one closing cost you will not meet here and do meet in most states. Closing costs here run about 2% to 4% of the price — $5,601 to $11,202 on the median home, which is the real entry fee for the annual saving this article has been describing.
13. Where these Indiana figures are approximate
Every income tax figure above comes from this site's own Indiana record, and that record notes its own limits. They are reproduced here rather than left in the dataset, because a reader who falls into one of these cases is being quoted a number that is wrong for them.
- Because the civil service annuity deduction is reduced dollar for dollar by Social Security and Railroad Retirement tier 1 benefits, a calculator that applies the flat $16,000 without the offset will overstate the deduction for nearly every real retiree.
- Indiana's flat rate steps down again to 2.90% for tax year 2027 under the same legislated schedule that produced the 2.95% figure here, so a 2026 record still in place during 2027 will overstate every Indiana tax bill rather than merely drift.
None of this affects the property tax or insurance lines, which come from a separate dataset and are not modelled.
If you are in one of the cases above, treat the income tax figure as the shape rather than the amount and get the number from a preparer who can see your actual return.
14. What Indiana does not exempt you from
The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.
Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.
Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.
IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.
And capital gains are still federally taxed. What Indiana adds on top is a separate question from what the federal system takes.
15. Establishing that you actually live here
Any state tax advantage is worth nothing until Indiana is your domicile, and the state you left may disagree about when that happened.
High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.
The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.
16. Who Indiana actually suits
A military retiree, whose pension is exempt here while a private one is not.
Someone with a government pension, which this state treats better than a private one of the same size.
It suits an affluent retiree least. At the affluent profile the bill is $4,100, and whatever exclusion helps a modest income has stopped helping by then.
17. What to check before you decide
Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.
Get a real insurance quote on a real address. $2,985 is the state average; construction, roof age and exposure move it a long way.
Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in Indiana the mix between Social Security and distributions changes the answer.
And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.
Frequently asked questions
Does Indiana tax Social Security? No. Fully exempt with no threshold, no phase-out and no age condition. Indiana begins from federal AGI, so any federally taxable portion of benefits enters the Indiana base and is then removed: all Social Security benefits and Railroad Retirement Board benefits included in federally taxed income are deducted on the Indiana return.
Does Indiana tax 401(k) or IRA withdrawals? Taxed in full at the 2.95% state rate plus the county rate. Indiana offers NO general deduction for distributions from a 401(k), 403(b), or traditional IRA. This is the single most consequential contrast with Indiana's neighbours: Illinois exempts these distributions entirely and Iowa exempts them for anyone 55 or older, while Indiana taxes them from the first dollar at every age. The narrow deductions Indiana does offer are for federal civil service annuities and for military retirement pay - see pensions - and neither reaches an ordinary private-sector retirement account.
What about pensions — private, government, or military? A $50,000 pension costs $1,446 if private, $974 if a government pension, and $0 if military retired pay. Those differences are the state's own policy, not an accident of the arithmetic.
What does retiring in Indiana actually cost? Income tax of $1,770 on the typical profile, plus about $2,128 of property tax and $2,985 of insurance on the median home — $6,883, which is 21st of 50.
Is Indiana a cheap state to retire in? On these three lines it ranks 21st of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.
What does a Roth conversion cost in Indiana? An extra $1,475 in state tax on $50,000 converted, and $2,950 on $100,000. That is 3% of the amount converted, on top of the federal tax.
Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $590 in state tax, an effective 3%.
Would a neighbouring state be cheaper than Indiana? Michigan is the cheapest of Indiana and its neighbours at $5,984 against Indiana's $6,883.
Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.
Does this article include local income tax? Some Indiana localities levy their own income tax on top of the state figure above — for example Porter County 0.5%, Spencer County 0.8%, Harrison County 1%, Hamilton County (Carmel, Fishers, Noblesville) 1.1%, Vanderburgh County (Evansville) 1.25%, Tippecanoe County (Lafayette, West Lafayette) 1.28%, Lake County (Gary, Hammond) 1.5%, Allen County (Fort Wayne) 1.59%, St. Joseph County (South Bend)
Will Indiana's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.
What to do next
Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.
- Retirement state tax calculator — what any state charges on your income, cited per state
- RMD calculator — the distribution you must take, which no state changes
- Home insurance premium estimator — the line this article says decides it
- The Relocation Tax Playbook — establishing domicile, and the states that contest it