Taxes for Retirees in Indiana

The middle-American state of Indiana also ranks somewhere in the middle when it comes to the tax burden on retirees. That tax burden ranked 23rd highest of all states in the nation in 2010, according to the Tax Foundation. However, to consider what taxes for retirees in Indiana will mean for your pocketbook, you'll have to do the math.

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It isn't just the presence or absence of a state income tax that makes it a good place to retire, says the Retirement Living Information Center. You also have to consider sales, excise, license, income, property, estate, inheritance, and intangible taxes. According to Kiplinger, there are three things to consider when it comes to taxes for retirees in Indiana.

The Big Picture - Taxes are a give-and-take situation. There are some tax breaks in Indiana, including exemptions for Social Security benefits and limited exemptions for military pensions and federal civil-service pensions. The income tax is a flat 3.4 percent, which will go down to 3.23 percent in 2017. However, some counties also impose a local income tax, which plants the state in the middle when it comes to tax breaks and burdens.

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State Sales Tax - The state sales tax is 7 percent here, and food and prescription drugs are exempt. By comparison, states like Alabama and Georgia have a 4 percent sales tax while Kentucky and Iowa have a 6 percent tax. Some states are even higher, such as California's 7.5 percent sales tax. Meanwhile, states like Alaska and Delaware have no state sales tax at all.
Adding Up All of the Taxes -  The biggest thing to consider is how all of your taxes add up. In Indiana, there's a flat income tax of 3.4 percent, property tax administered at the local level, and a 7 percent sales tax. That doesn't make Indiana one of the most tax-friendly states, but it also doesn't make it one of the worst. In middle America, that leaves you weighing your options from the middle of the pack.

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