Military Retirement in Indiana
Complete 2026 Tax Guide for Veterans
100% Tax-Free Military Retirement
Full exemption since 2024 - no income limits!
Quick Facts: Indiana for Military Retirees
Indiana Military Retirement Tax Overview
How Indiana Taxes Military Retirement (2026)
100% Tax-Free!
Starting in 2024, Indiana exempts ALL military retirement pay from state income tax. There is no income limit, no age requirement, and no cap on the exemption amount.
Indiana made a significant change in 2024, expanding what was previously a $6,250 deduction into a full 100% exemption for military retirement income. This places Indiana among the most tax-friendly states for military retirees in the Midwest.
What's Exempt
- - All military retirement pay (any amount)
- - Survivor Benefit Plan (SBP) payments
- - VA disability compensation (federal law)
- - Combat-Related Special Compensation (CRSC)
Still Taxable
- - Civilian employment income (3.05% state tax)
- - TSP/401k withdrawals
- - Social Security (taxed at federal level, exempt at state)
- - Other retirement income (partial exemption available)
2026 Tax Savings Example
An O-5 with 24 years receiving $5,400/month ($64,800/year) in military retirement saves $1,976/year in state taxes compared to states that fully tax retirement income at 3.05%.
Indiana Veteran Property Tax Benefits
1% Property Tax Cap
Indiana constitutionally limits property taxes on homesteads to 1% of assessed value. This is one of the lowest effective property tax rates in the nation.
Disabled Veteran Deduction
Veterans with service-connected disability receive $24,960 property tax deduction. Those with total (100%) disability receive $37,440 deduction.
Surviving Spouse Deduction
Unremarried surviving spouses of veterans who died in service or from service-connected causes may receive up to $37,440 property tax deduction.
Homestead Standard Deduction
All Indiana homeowners receive a standard deduction of the lesser of 60% of assessed value or $48,000 - stackable with veteran deductions.
Military Installations in Indiana
Naval Support Activity Crane
Martin County, Southern Indiana
- - 3rd largest Navy installation by land area
- - 63,000 acres of secure facilities
- - Weapons and munitions research
- - 4,000+ military/civilian employees
- - Major defense contractor presence
Grissom Air Reserve Base
Peru, North-Central Indiana
- - Home of 434th Air Refueling Wing
- - KC-135 Stratotanker operations
- - Air Force Reserve Command
- - Strong reserve/guard employment
Camp Atterbury Joint Maneuver Training Center
Edinburgh, Central Indiana
- - 45,000 acres training facility
- - National Guard/Reserve training
- - Mobilization and demobilization center
- - Near Indianapolis
181st Intelligence Wing
Terre Haute, Western Indiana
- - Air National Guard intelligence unit
- - Cyber and intelligence operations
- - Growing mission set
- - Security clearance opportunities
Indiana Cost of Living for Retirees
Cost Breakdown
- Overall Cost of Living 10% below average
- Median Home Price $230,000
- Property Tax Rate 0.81% (1% cap)
- Sales Tax 7%
- Average Rent (2BR) $1,050/month
Regional Variations
- Indianapolis Metro: Largest job market, moderate costs
- Fort Wayne: Very affordable, growing economy
- Bloomington: Higher costs due to IU, cultural amenities
- Southern Indiana: Very affordable, near Crane
- Northwest Indiana: Chicago suburbs, higher costs
Education Benefits for Indiana Veterans
National Guard Supplemental Grant
Indiana National Guard members receive up to 100% tuition assistance at Indiana public colleges while serving, stackable with federal GI Bill benefits.
Purple Heart Resident Tuition
Purple Heart recipients automatically qualify for resident tuition rates at any Indiana public university regardless of their state of residence.
Child of Disabled/Deceased Veteran Fee Remission
Children of 100% disabled veterans or those who died in service may qualify for fee remission (free tuition) at Indiana public universities.
In-State Tuition for Veterans
All veterans qualify for in-state tuition at Indiana public colleges under the Veterans Choice Act, regardless of previous residency.
Military Family Relief Fund
Emergency financial assistance grants up to $2,500 for Indiana military families facing hardship, including education-related expenses.
Best Indiana Cities for Military Retirees
1. Indianapolis
State capital, diverse economy, affordable major city
2. Bloomington (Near Crane)
University town, close to Naval Support Activity Crane
3. Fort Wayne
Very affordable, growing economy, family-friendly
4. Carmel/Fishers (Indianapolis Suburbs)
Top-rated schools, low crime, excellent amenities
VA Healthcare in Indiana
VA Medical Centers
- Richard L. Roudebush VAMC - Indianapolis
- VA Northern Indiana HCS - Fort Wayne/Marion
Community-Based Clinics
18+ community-based outpatient clinics including:
- - Bloomington, Terre Haute, Lafayette
- - Muncie, South Bend, Evansville
- - Columbus, Richmond, Vincennes
Indiana VA Healthcare Rating: Good
Indianapolis VAMC is a teaching hospital partnered with Indiana University School of Medicine, offering comprehensive specialty care. Community clinics cover most of the state.
Pros & Cons of Retiring in Indiana
Advantages
- ✔ 100% military retirement tax exemption
- ✔ Very affordable cost of living (10% below average)
- ✔ Low property taxes with 1% constitutional cap
- ✔ Naval Support Activity Crane employment
- ✔ Central location - easy to travel
- ✔ Good VA healthcare coverage
- ✔ Social Security also tax-free
Disadvantages
- ✘ Limited active-duty military presence
- ✘ Cold winters with significant snow
- ✘ Higher sales tax (7%)
- ✘ Less diverse economy in rural areas
- ✘ Limited major airports (mainly Indianapolis)
- ✘ Tornado risk in spring/summer
Frequently Asked Questions
Does Indiana tax military retirement pay?
No. As of 2024, Indiana exempts 100% of military retirement pay from state income tax. There are no income limits or age requirements for this exemption.
Is Indiana a good state for military retirees?
Yes! Indiana offers 100% military retirement tax exemption, very affordable living (10% below average), low property taxes, and good VA healthcare. The main drawbacks are cold winters and limited active-duty installations.
What military jobs are available in Indiana?
Naval Support Activity Crane employs 4,000+ and focuses on weapons/munitions research with many contractor opportunities. Grissom ARB has reserve positions. Camp Atterbury provides training center employment. Defense contractors are present throughout Indianapolis.
How does Indiana compare to neighboring states?
Indiana is more tax-friendly than Michigan (partial exemption) and comparable to Illinois (full exemption). Indiana has lower property taxes than Illinois and Michigan. Ohio also offers full exemption but has higher property taxes.
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