Veteran Tax Exemptions in Indiana, Illinois & Michigan

Many Veterans miss tax benefits they qualify for because each state handles them differently and almost none of them apply automatically. This guide covers what Indiana, Illinois, and Michigan offer, who qualifies, and where to file.

Indiana Veteran tax benefits

Indiana income tax

• Active duty, Reserve, and National Guard pay: exempt from Indiana income tax
• Military retirement pay and survivor benefits: fully deductible from Indiana taxable income

Indiana property tax

Indiana changed its Veteran property tax benefits under HEA 1210. The old $24,960 and $14,000 assessed-value deductions end with tax bills payable in 2026. For bills payable in 2027, the benefits are:

• Totally disabled Veterans: a deduction equal to 100% of the assessed value of a primary residence, with no home value cap
• Wartime Veterans with a disability rating of 10% or more: a $350 annual credit
• Veterans age 62 or older with a disability rating of 10% or more: a $250 annual credit
• Veterans who meet both credit rules: both credits, for $600 a year

Special assessments and other charges on the bill may still apply, so the total due for a totally disabled Veteran may not be $0.

File State Form 12662 with your county auditor by January 15, 2027. Totally disabled Veterans must file a new form to receive the 100% deduction. Read the full breakdown in Indiana property tax relief for Veterans.

Learn more: Indiana Department of Veterans Affairs

Illinois Veteran tax benefits

Illinois income tax

• Active duty, Reserve, and National Guard pay: exempt from Illinois income tax
• Military retirement pay and Survivor Benefit Plan payments: not taxed by Illinois

Illinois property tax

Standard Homestead Exemption for Veterans with Disabilities. The benefit depends on your service-connected disability rating:

• 30% to 49%: $2,500 reduction in equalized assessed value
• 50% to 69%: $5,000 reduction in equalized assessed value
• 70% or higher: the first $250,000 of equalized assessed value is exempt from property tax

Specially Adapted Housing exemption. Homes bought or modified with a VA Specially Adapted Housing grant can receive a reduction of up to $100,000 in assessed value.

Returning Veterans’ Homestead Exemption. A $5,000 reduction in assessed value for Veterans returning from active duty in an armed conflict.

Surviving spouses. An unremarried surviving spouse can often continue the Veteran’s exemption. Spouses of service members killed in the line of duty may also qualify.

Most Illinois exemptions must be renewed each year. Ask your county assessor for the renewal form and deadline.
Learn more: Illinois Department of Veterans’ Affairs

Michigan Veteran tax benefits

Michigan income tax

• Active duty pay: exempt from Michigan income tax
• Military retirement pay and Survivor Benefit Plan payments: exempt from Michigan income tax

Michigan property tax

Disabled Veteran exemption. Michigan fully exempts the primary residence of a Veteran who meets one of these rules:

• Rated by the VA as permanently and totally disabled
• Received a VA Specially Adapted Housing grant
• Rated by the VA as individually unemployable

There is no income limit and no home value cap. Since 2025, an approved exemption stays in place without a new filing each year, and it can continue for an unremarried surviving spouse. Apply with your city or township assessor.

Homestead Property Tax Credit. Michigan also has a property tax credit with a special calculation for some Veterans and surviving spouses. You claim it with your state tax return.

Learn more: Michigan Department of Military and Veterans Affairs

What you need to apply

• Your DD-214 showing your character of discharge and dates of service
• Your current VA award letter showing your disability rating
• Proof of age, if the benefit has an age rule
• Proof that the home is your primary residence

Most of these documents are available on va.gov. You will need an ID.me account to sign in. Here’s how to set up an ID.me account.

Common mistakes to avoid

• Assuming the benefit is automatic. Most require an application with your county or local assessor.
• Missing the deadline. A missed deadline usually means waiting a full year.
• Not refiling after a rating change. A higher disability rating can move you into a larger benefit.
• Not refiling after a move. Benefits do not follow you to a new county or state.
• Not checking the tax bill. Confirm the benefit appears on your next bill and keep your approval letter.

Your County Veteran Service Office, the VFW, the American Legion, and Disabled American Veterans can help with applications at no cost.

Frequently asked questions

Do Veterans pay state income tax on military retirement pay in Indiana, Illinois, or Michigan?

No. All three states exempt military retirement pay from state income tax. Check each state’s tax form instructions, since you may still need to report the income and claim the deduction or subtraction.

What property tax relief do disabled Veterans get in Indiana?

For tax bills payable in 2027, totally disabled Veterans can deduct 100% of their home’s assessed value. Other Veterans with a disability rating of 10% or more may receive a $350 credit, a $250 credit, or both. File State Form 12662 with your county auditor by January 15, 2027.

Do Illinois Veterans with a 70% disability rating pay property taxes?

Illinois exempts the first $250,000 of a home’s equalized assessed value for Veterans with a service-connected disability rating of 70% or higher. Tax may still be due on value above that amount. Confirm the details and filing rules with your county assessor.

Do disabled Veterans in Michigan have to reapply for the property tax exemption every year?

Generally no. Since 2025, an approved disabled Veteran exemption stays in place without a new filing each year. Tell your local assessor if your eligibility or residence changes.

Questions about your Veteran benefits?

Tax benefits lower the cost of owning a home. Your VA loan benefit can lower the cost of buying or refinancing one. Start with the VA Loan Overview, or see how a VA IRRRL streamline refinance works if you already have a VA loan.

I work with Veterans in Indiana, Illinois, and Michigan. Call 219-695-0369 or text me at 219-758-8072.

Get prequalified here or send me a message.

This information is current as of October 2026. Tax laws change. Confirm amounts, forms, and deadlines with your county auditor or assessor before you file. This guide is for educational purposes and is not tax or legal advice.