Q: Which states do not tax federal retirement benefits?
A: States with no personal income taxes include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Those states that exempt the total amount of civil service annuities include Alabama, North Carolina (beginning in 1998 if the individual had five years of creditable government service as of Aug. 12, 1989), Michigan, Illinois, Pennsylvania, New York, Kentucky (only if retired before Jan. 1, 1998), Hawaii, Oregon (not taxed if retired before Oct. 1, 1991; if retired on that date or later, only taxed on the portion earned after that date), Massachusetts, Kansas, Wisconsin (if received from a retirement account established before 1964), Mississippi and Louisiana. Just remember that those states that have no personal income tax or exempt the total amount of civil service annuities have to get the income they need somewhere, for example, real estate, personal property, sales, etc. The same goes for municipal jurisdictions within a state.