(a) Each taxable year, an individual, or the individual's surviving spouse, is entitled to the following:

1. (1) An adjusted gross income tax deduction for the first five thousand dollars ($5,000) of income, excluding adjusted gross income described in subdivision (2), received during the taxable year by the individual, or the individual's surviving spouse, for the individual's service in an active or reserve component of the armed forces of the United States, including the United States Army, United States Navy, United States Air Force, United States Space Force, United States Coast Guard, United States Marine Corps, Merchant Marine, Indiana Army National Guard, or Indiana Air National Guard, or the United States Public Health Service Commissioned Corps or the National Oceanic and Atmospheric Administration Commissioned Officer Corps.

2. (2) An adjusted gross income tax deduction for income from retirement or survivor's benefits received during the taxable year by the individual, or the individual's surviving spouse, for the individual's service in an active or reserve component of the armed forces of the United States, including the United States Army, United States Navy, United States Air Force, United States Space Force, United States Coast Guard, United States Marine Corps, Merchant Marine, Indiana Army National Guard, or Indiana Air National Guard, or the United States Public Health Service Commissioned Corps or the National Oceanic and Atmospheric Administration Commissioned Officer Corps. The amount of the deduction is the lesser of:

   1. (A) the benefits included in the adjusted gross income of the individual or the individual's surviving spouse; or

   2. (B) six thousand two hundred fifty dollars ($6,250) plus the following:

      1. (i) For taxable years beginning in 2019, twenty-five percent (25%) of the amount of the benefits in excess of six thousand two hundred fifty dollars ($6,250).
      2. (ii) For taxable years beginning in 2020, fifty percent (50%) of the amount of the benefits in excess of six thousand two hundred fifty dollars ($6,250).
      3. (iii) For taxable years beginning in 2021, seventy-five percent (75%) of the amount of the benefits in excess of six thousand two hundred fifty dollars ($6,250).
      4. (iv) For taxable years beginning after 2021, one hundred percent (100%) of the amount of the benefits in excess of six thousand two hundred fifty dollars ($6,250).

(b) An individual whose qualified military income is subtracted from the individual's federal adjusted gross income under IC 6-3-1-3.5 (a)(18) for Indiana individual income tax purposes is not, for that taxable year, entitled to a deduction under this section for the same qualified military income that is deducted under IC 6-3-1-3.5 (a)(18).

As added by Acts 1977, P.L.78, SEC.3. Amended by P.L.76-1985, SEC.2; P.L.144-2007, SEC.5; P.L.6-2012, SEC.49; P.L.250-2015, SEC.16; P.L.217-2017, SEC.64; P.L.214-2018(ss), SEC.7; P.L.162-2019, SEC.1; P.L.58-2025, SEC.2; P.L.238-2025, SEC.11.