Veterans Can Now Deduct More for Military Retirement Funds

(UNDATED) – Military retirees and surviving spouses may experience a larger tax deduction from their military retirement funds this individual income tax season due to a 2019 Indiana tax law, advises the Indiana Department of Revenue (DOR).

Gov. Eric Holcomb signed House Enrolled Act (HEA) 1010 in the summer of 2019 to allow eligible taxpayers to deduct up to $6,250 plus an additional 50% of their military retirement income or survivor’s benefits for the 2020 tax year. This is an increase of 25% since 2019 and the deducible amount will continue to increase by 25% each year until 2022 when 100% of the amount received will be eligible for the deduction.  

To claim the Military Retirement Income or Survivor’s Benefits Deduction, use Schedule 2 (or Schedule C if filing Form IT-40PNR) from the Indiana individual income tax return. Information on calculating the amount to deduct is available in tax instruction booklets, which are available online.

More information on this deduction, tax information for current military service members, the latest tax forms and instructions for the 2020 tax year are available on DOR’s website at

Customers with questions about individual income tax season are encouraged to visit or email Customer Service at