Questions & Answers

What is the Civil Service Annuity Deduction?

Full-Year Resident Instructions

If your federal adjusted gross income includes federal civil service annuity payments, you may be able to take a deduction if you were at least 62 years of age by December 31, 2018 and/or a surviving spouse of a civil service annuitant.

To figure your deduction, begin with the amount of annuity payments received or $16,000, whichever is less. Subtract from that amount any Social Security benefits and tier 1 Railroad Retirement benefits (issued by the Railroad Retirement Board) you received.

Example. The taxable amount of your civil service annuity is $6,000. You received $1,200 in Social Security income. You are age 67. Here's how to figure your deduction:

Lesser of the taxable amount of the annuity ($6,000) or $16,000$6,000
Total Social Security benefits$1,200
Allowable deduction$4,800

If you and your spouse both received civil service annuities, you may each take this deduction for a maximum of $32,000 (no more than $16,000 per qualifying person), provided you both meet the age requirement.

Example. Matthew and Claire, both age 68, file a joint federal and state income tax return. They each receive a civil service annuity and Social Security income.

Matthew's taxable civil service annuity is $13,700; he also received $17,500 in Social Security income. Since the Social Security income he received is greater than the taxable amount of his annuity, he is not eligible for a deduction.

Claire's taxable civil service annuity is $21,900; she also received $6,300 in Social Security income.

Lesser of the taxable amount of the annuity ($21,900) or $16,000$16,000
Total Social Security benefits$6,300
Allowable deduction$9,700

Surviving Spouse
A surviving spouse may be eligible to claim this deduction. There is no age requirement for the surviving spouse.

To figure the deduction, begin with the taxable amount of civil service annuity income or $16,000, whichever is less. Subtract from that amount any Social Security income and tier 1 Railroad Retirement income (issued by the Railroad Retirement Board) the surviving spouse received.

Example. Marie is a surviving spouse. The taxable amount of her civil service annuity is $14,500, and she received $1,200 in Social Security income.

Lesser of the taxable amount of the annuity ($14,500) or $16,000$14,500
Total Social Security benefits$1,200
Allowable deduction$13,300

You must maintain Form CSA 1099-R with your records as the department can require you to provide it at a later date.

For more information about this deduction see Income Tax Information Bulletin #6 at Indiana's Department of Revenue website.

Part-Year / Nonresident Resident Instructions

If your Indiana income includes federal civil service annuity payments, you may be eligible to take a deduction if you were at least 62 years of age by the end of the tax year and/or are a surviving spouse of a civil service annuitant.

For each qualifying individual, the deduction is limited to:
  • the lesser of the taxable amount of civil service annuity income included in federal adjusted gross income or $16,000,
  • less all amounts of Social Security income and tier 1 Railroad Retirement income (issued by the Railroad Retirement Board) received by the qualifying individual,
  • multiplied by the ratio of civil service annuity income taxable to Indiana as compared to all taxable civil service annuity income.

Example. You were a full-year Indiana resident (your spouse was a part-year resident). The taxable amount of your civil service annuity reported on Schedule A, Lines 11A and 11B is $6,000. You received $1,200 in Social Security income. You are age 67.

Figure your deduction by using the following three-step method:

Step 1
Enter your amount of civil service annuity from Schedule A, line 11B$6,000
Enter your amount of civil service annuity from Schedule A, line 11A$6,000
Divide line 1A by line 1B (if the result is zero or less, STOP; there is no deduction)1.00

Step 2
Enter the lesser of the taxable amount of your annuity or $16,000$6,000
Enter the total of your Social Security and tier 1 Railroad Retirement income-$1,200
Tentative allowable deduction$4,800

Step 3
Multiply the amount on Line 1C (1.00) by the amount on Line 2C ($4,800) = $4,800. This is your deduction.

Both spouses receive a civil service annuity.
If both you and your spouse received a civil service annuity, you may each be eligible to take this deduction for a maximum of up to $16,000 per qualifying person. Each of you must figure your deduction separately.

Example. Matthew and Claire, both age 68, file a joint federal and state income tax return. They each receive a civil service annuity and Social Security income. They moved from Indiana to Arizona on July 1 of the tax year.

Matthew's taxable civil service annuity is $13,700, which he reported on Schedule A, Line 11A. He reported the $6,850 portion received while he was an Indiana resident on Line 11B. He also received $17,500 in Social Security income. Since his Social Security income (regardless of where he lived when he received it) is greater than the total taxable amount of his annuity, he is not eligible for a deduction.

Claire's taxable civil service annuity is $21,900, which she reported on Schedule A, Line 11A. She reported the $10,950 portion received while she was an Indiana resident on Line 11B. She also received $6,300 in Social Security income.

Here is how to figure Claire's deduction.

Step 1
Enter Claire's civil service annuity from Schedule A, line 11B$10,950
Enter Claire's civil service annuity from Schedule A, line 11A$21,900
Divide line 1A by line 1B (if the result is zero or less, STOP; there is no deduction).50

Step 2
Enter the lesser of the taxable amount of Claire's annuity or $16,000$16,000
Enter the total of Claire's Social Security and tier 1 Railroad Retirement income-$6,300
Tentative allowable deduction$9,700

Step 3
Multiply the amount on Line 1C (.50) by the amount on Line 2C ($9,700) = $4,850. This is your deduction.

Surviving Spouse
A surviving spouse may be eligible to claim this deduction. There is no age requirement for the surviving spouse.

To figure the deduction, begin with the taxable amount of civil service annuity income or $16,000, whichever is less. Subtract from that amount any Social Security income and tier 1 Railroad Retirement income (issued by the Railroad Retirement Board) the surviving spouse received.

Example. Marie is a surviving spouse. The taxable amount of her civil service annuity is $14,500, and she received $1,200 in Social Security income.

Lesser of the taxable amount of the annuity ($14,500) or $16,000$14,500
Total Social Security benefits$1,200
Allowable deduction$13,300

You must maintain Form CSA 1099-R with your records as the department can require you to provide it at a later date.

For more information about this deduction see Income Tax Information Bulletin #6 at Indiana's Department of Revenue website.

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