LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6110 NOTE PREPARED: Oct 22, 2020
BILL NUMBER: HB 1346 BILL AMENDED:
SUBJECT: Income Tax Exemption for Veterans at Least 78 Years of Age.
FIRST AUTHOR: Rep. Cook BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED: X GENERAL IMPACT: State & Local
DEDICATED
FEDERAL
Summary of Legislation: The bill provides a tax exemption from adjusted gross income for an individual
who is at least 78 years of age and has served in the military during a time of war.
Effective Date: January 1, 2022.
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR would incur some
administrative expenses relating to the revision of tax forms, instructions, and computer programs to reflect
the new income tax deduction. The DOR's current level of resources should be sufficient to implement these
changes.
Explanation of State Revenues: The bill establishes an Adjusted Gross Income (AGI) Tax deduction. The
deduction is effective beginning in tax year 2022, so the revenue impact will likely begin in FY 2023. The
deduction could reduce state General Fund revenue by an estimated $33.3 M to $54.0 M per year beginning
in FY 2023.
The bill provides a tax deduction to an Indiana taxpayer who (1) at least 78 years of age, and (2) has served
in the military during a time of war. It provides that the taxpayer’s entire adjusted gross income is exempt
from state income tax.
Additional Information - The estimates are based on veteran population data published by the U.S.
Department of Veterans Affairs. There are between 58,000 and 72,000 veterans in Indiana that could qualify
for the deduction. Indiana income tax return data was used to assign a low and high level of average income
among the eligible veteran population. The lower estimate assumes fewer eligible claimants and a lower
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average income per claimant. The upper bound assumes more eligible claimants and a higher average income
per claimant.
Current federal tax law exempts the disability compensation received by veterans from adjusted gross
income. This exemption also carries into Indiana adjusted gross income. Indiana exempts military retirement
income from state income tax. The analysis assumes that the veterans claiming the new deduction also
receive disability compensation, military retirement income, or income from other sources.
Explanation of Local Expenditures:
Explanation of Local Revenues: Because the deduction will decrease taxable income, counties imposing
local income taxes could potentially experience a decrease in revenue. Based on the current average local
income tax rate of 1.58%, local income tax collections on a statewide basis could potentially be reduced by
$15.8 M to $26.0 M annually.
State Agencies Affected: Department of State Revenue.
Local Agencies Affected: Local units.
Information Sources: National Center for Veterans Analysis and Statistics; LSA Income Tax Database.
Fiscal Analyst: Olivia Smith, 317-232-9869.
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