State Personal Income Taxes on Pensions and Retirement Income | Tax Year 2014


Most states that levy a personal income tax allow people who receive retirement income to exclude part of it from their taxable income. The table that accompanies this introduction provides state-by-state detail.

“Retirement income” means income from federal, state and local governments’ retirement plans, Social Security, Railroad Retirement, private pension plans, and deferred compensation plans in the public and private sectors. Retirement income excludes income from current employment, rents and dividends, disability payments and SSI. This report does not address personal exemptions or deductions that are available to every filer over some specified age, like the federal provision for a larger standard deduction for people who are 65 years old or older than for those under 65.

State policies on retirement income exclusions vary greatly, but have one or both of two purposes: to protect the income of taxpayers who are no longer in the workforce, and to serve as an economic development tool by attracting retired people to, or retaining them in, a state.  Such tax provisions seem to have originated years ago as a means of assisting retired public employees who received relatively small pensions. Over the years, many states have made age, not former employment in the public sector, the criterion for retirement income exclusions.

PDFDownload the full report (14 pages)

Before contacting NCSL for more information, please be aware that NCSL does not advise individuals on tax matters.