Indiana Military Service Deduction
If your income includes active or reserve military pay, you will be able to take a deduction (regardless of your age).
If you are retired from the military or are the surviving spouse of a person who was in the military, you may be able to take this deduction if:
- You were at least 60 years of age by December 31, 2014
- You received military retirement or survivor's benefits in 2014, and
- The benefits received as retirement income were reported on your federal return.
Your deduction will be the actual amount of military income received (i.e. military pay and/or survivor's benefits) or $5,000 whichever is less. If both you and your spouse received military income, you may each claim the deduction for a maximum of $10,000.00
If you served in the Indiana National Guard or the reserve component of the armed forces during 2014, you should review the instructions contained in the Indiana long form IT-40.
Military income earned while in a combat zone is not taxable on your Federal or State income tax returns. Since Indiana is not taxing this income, your combat zone income is not eligible for a deduction.
If you received a combination of military pay, retirement pay and/or survivor's benefits during the tax year, the total deduction cannot be greater than $5,000 per qualifying person. For example, if you earned $6,000 in military pay and $1,500 in retirement pay, you can deduct only $5,000 of your military income.
For more information about this deduction, see Income Tax Information Bulletin #6 and #27.