Military Pensions Fully Exempt From Indiana Income Tax Within Four Years

Veterans’ military pensions will be 100% exempt from Indiana’s income tax in the next four years. And the state is using that to recruit retiring servicemembers to Indiana.

Gov. Eric Holcomb pushed lawmakers to exempt military pensions from the income tax for years. In 2019, he finally got his wish. It will ultimately cost Indiana nearly $15 million per year in revenue when the pensions are fully exempt. Holcomb says it’s a major recruiting tool.

“When I got out of the Navy, you looked at a list on a screen," Holcomb says. "And you saw the states that did exempt it and you saw the states that did not.”

Complicating Indiana’s recruitment of retiring servicemembers are the highly publicized scandals at the state Department of Veterans Affairs – including misuse of state funds meant to help veterans. But new Director Dennis Wimer says he’s made changes.

“We are building the right kind of organization with the right kind of understanding and work and open and public access,” Wimer says.

Wimer says that includes staff changes, with a new general counsel.