The income on line 1 of Form IT-40 may include active or reserve military pay. If it does, you will be able to take a deduction (regardless of your age).
Beginning in 2024, this deduction is for the full amount of military pay included in your federal adjusted gross income.
Beginning in 2025, members of the United States Space Force, the United States Public Health Service Commissioned Corps, and the National Oceanic and Atmospheric Administration Commissioned Officer Corps are eligible for the Military Service Deduction.
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. You will be eligible if:
- You received military retirement or survivor's benefits during the taxable year, and
- The benefits received as retirement income were reported on your federal return.
Important: If you served in the Indiana National Guard or the reserve component of the armed forces during the taxable year, you should review the instructions contained on Page 22 of the Indiana IT-40 Instructions.
Note: Military income earned while in a combat zone is not taxable on your Federal or State income tax returns. Since Indiana does not tax this income, your combat zone income is not eligible for a deduction.
To enter the Indiana Military Service Deduction, go to:
- State
- Press three dots and select Edit
- Subtractions from Income
- "Enter the amount of your active duty, National Guard, and/or reserve military income."
- Continue to save
For more information about this deduction, see Information Bulletin #6 or Information Bulletin #27.