Indiana Resident, National Guard Military exemptions, and working outside Indiana (State Tax questions)

[BOBOjimim0909]

Greetings,

I am a resident of Indiana, and maintain a household in the state where my family lives/works/goes to school.  During Mon-Fri workweek and monthly training assemblies, I report to my unit of assignment 3 hours away with the Tennessee National Guard.  I am a full time, Title 32 dual-status technician during Mon-Fri, and on the training weekends  I am on Title 32 military training orders.  (I stay with family rent-free during the time I am in Tennessee).  I have not been mobilized during these tax seasons, but will likely mobilize in 2025 (that is a different question for a different time).   

My finance unit stopped taking out Indiana state taxes on my weekend military duty pay for 2023 and 2024 under the new Indiana law.  However in re-reading the IB27 and related press-articles, it also appears to affirm that dual status technician pay is also fully exempt.  But it also seems to to suggest this only applies to members of Indiana National Guard and  of other Reserve Components.  

Q1:  Does IB27 National Guard/Reserve exemption include Indiana Residents living in Indiana who are serving in other state's National Guard or Reserve units?  (if not, then do we get any exemption?)

Q2:  Does IB27 exemption include full time dual status pay?

Q3:  If dual status tech pay is eligible, how should I code it in TurboTax to indicate military association?  (we get separate W-2s from the Defense Pay Office, so do I just code both income sources as "active duty pay"?)

Q4:  Is there a cap on the exemption, or is it fully exempt?  (some articles appear to say $5,000 but that appears to be either dated or related to active duty pay). 

**Note, understand any other non Reserve / Guard / military pay sources is still fully taxable as a resident of Indiana.    

References:

https://www.in.gov/dor/files/ib27.pdf

https://www.dvidshub.net/news/460349/indiana-national-guard-soldiers-airmen-exempt-state-income-tax

[DaveF1006]

It depends. in reading this State of Indiana publication, in the section labeled Reserve Component or National Guard, " a member of a reserve component of the armed forces or a member of the National Guard is allowed a deduction from adjusted gross income for wages earned as a result of the member’s military service, including National Guard state active duty, regardless of mobilization, deployment, or federalization of the member’s National Guard unit. This includes wages earned as a military technician (dual status)" This answers question 1 and 2. 

This would be considered active military pay for reporting purpose. Since the National Guard is a reserve component of the US Armed Forces, the $5000 limit does still apply. it does state in this reference source "Indiana resident Service members serving in an active or reserve component of the U.S. Armed Forces are eligible for an income tax deduction of $5000 for their military pay".

[BOBOjimim0909]

Thank you for the response.   I finally spoke with two senior supervisors at the Indiana Department of Revenue who provided concrete responses ( see below):

Q1:  Does IB27 National Guard/Reserve exemption include Indiana Residents living in Indiana who are serving in other state's National Guard or Reserve units?  (if not, then do we get any exemption?)

YES!  All Indiana residents serving in National Guard and Reserve (including the NG units of other states) ARE ELIGIBLE for this deduction.   **Note, if they are mobilized, then there is the Military Service Deduction, whihc has a different tax situation.

Q2:  Does IB27 exemption include full time dual status pay?  

YES!  Dual Status, Title 32 Technicians and Title 10 Air Reserve Technicians ARE ELIGIBLE for this deduction.   

Q3:  If dual status tech pay is eligible, how should I code it in TurboTax to indicate military association?  (we get separate W-2s from the Defense Pay Office, so do I just code both income sources as "active duty pay"?) 

**I had to work with TurboTax to use the desktop version as the online version doesn't fully support marking the Technician W-2s correctly.  This is true for 2023 and 2024.  I just attempted to use the 2024 online version and it doesn't code the full time pay.  If you only need to tag the part-time traditional Guard pay W-2 then the online version works fine.   Customer Service will have to hook you up with a downloadable version.

Q4:  Is there a cap on the exemption, or is it fully exempt?  (some articles appear to say $5,000 but that appears to be either dated or related to active duty pay). 

Prior to 2023, there was a cap.  For Tax Year 2023 and 2024, military income is fully exempt from State income tax.  HOWEVER, local city and counties may still impose an income tax, and ANY non-military income is still subject to state income tax.

This was almost verbatim from IN State Income Tax officials....  Hope this helps!