75% Tax-exempt? Yes, please!
Updated: Feb 18, 2021
In 2019, Gov. Holcomb signed a new law to increase the income tax deduction for military retirement and survivor’s benefits. The initial began in 2019 and then will gradually increase through the 2022 tax year, when all of the benefits are deductible.
Jones explained how this gradual increase works. First, taxpayers can deduct up to $6,250 of their military pension or survivor benefits off the top. In 2019, taxpayers could deduct 25% of the amount over that $6,250. In 2020, that deduction increased to 50%.
In 2021, military retirement is 75% deductible.
By the time taxes for 2022 come around, 100% of the military retirement benefits and survivor benefits will be deductible.
“So it'll be just like Social Security benefits that you receive, which you do not pay taxes on,” Jones said. “The military retirement and survival spouse benefits will be the exact same thing. You will not have to pay taxes on 100% of those benefits.”
Excerpt taken from WTHR.com