Indiana allows you to deduct your disability retirement income as long as you meet all of the following:
- You were permanently and totally disabled at the time you retired
- Retired on disability before the end of the tax year, AND
- Received disability retirement income during the tax year.
This deduction is limited to a maximum of $5,200 per qualifying individual. Social Security benefits does not qualify for this deduction as Indiana does not tax it at all.
To make this manual entry, go to:
- State Section
- Subtractions from Income
- Other deductions
- Choose Disability retirement deduction from the drop down
See also Is my military pension/retirement income taxable to Indiana? .