Per the IN IT-40 Booklet Income Tax Instruction Booklet, page 16:
Line 7 – Military Service Deduction (including the National Guard and reserve component of the armed forces)
Important. The military service deduction and the military retirement income and/or survivor’s benefits deduction are reported in two different places.
The income on line 1 of Form IT-40 may include military pay from active duty, National Guard, and/or the reserve component of the armed forces (reserve). If it does, you may be eligible to take this deduction.
Military Retirement Income and/or Survivor’s Benefits Deduction 632
The income on line 1 of Form IT-40 may include military retirement income and/or survivor’s benefits. If it does, you (and/or your spouse, if married filing jointly and both qualify) may be eligible to take this deduction.
The taxability of this income is being phased out. For tax year 2022 and later, the deduction is equal to the entire amount of military retirement income and/or survivor's benefits.
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