State policies regarding the taxable status of Social Security retirement income vary widely. As of 2011, the District of Columbia and 28 out of the 41 states that have a broadbased income tax do not tax Social Security retirement income. The remaining states either mirror the federal tax policy for SSI or tax SSI on a graduated income scale so that those in the lower income brackets are taxed at very low rates or not at all.
Social Security Benefits Not Taxed in Indiana
Social Security benefits are not taxed in the state of Indiana. Railroad retirement benefits are also tax-exempt, but most other pensions and retirement income do count as taxable income.
Other Indiana Income Tax Deductions
Indiana taxpayers over age 65 are given a $1,000 deduction. Homeowners in Indiana are allowed deduct up to $2,500 from their income for property taxes on a principal place of residence.
Federal Taxation of Social Security Benefits
As of 2011, you have to pay federal taxes on your Social Security benefits if you file as an individual and your adjusted gross income is more than $25,000. If you are married and file a joint return, you will have to pay taxes if the total reported adjusted gross income is more than $32,000.
Taxation of Other Retirement Income
States have the authority to decide how to tax pensions and other retirement income, but within the limits of federal law. For example, states cannot discriminate against federal civil service or military retiree pensions of they give exemptions to state and local retirement pensions. There are 10 states that exclude all federal, state and local pensions from income taxes, and the rest range from no exemptions for pensions, as in California and Vermont, to some exemptions for in-state and federal pensions but not out-of-state pensions, as in Indiana, New York and Arizona. Indiana allows a $2,000 deduction for military pensions and civil service retirement annuities at the ages of 60 and 62, respectively.
- Retirement Living Information Center; Taxes by State; January 2011
- IN.gov: Indiana Deductions from Income
- Connecticut Department of Revenue Services; Taxability of Social Security Benefits for Connecticut Income Tax Purposes; December 2010
- Soxial Security Online; Frequently Asked Questions: Paying Income Tax on Social Security Benefits; July 2011