State taxation of federal pensions


Q: Illinois does not tax federal pension benefits. What other states having an income tax also do not tax federal pensions?

A: Alabama, Michigan, Pennsylvania, Hawaii, Massachusetts, Kansas, Mississippi, Louisiana and New York. In Kentucky, the total amount is exempt only if the individual retired before Jan. 1, 1998. In North Carolina, annuities aren’t taxed beginning in 1998, but only if the individual had five years of creditable service as of Aug. 12, 1989. In Oregon, annuities aren’t taxed for those who retired before Oct. 1, 1991; those who retired on or after Oct. 1, 1991, are taxed only on the portion attributable to government service from that point forward. In Wisconsin, there’s a full exemption if the retirement account was established before 1964.

FYI, the following states assess no personal income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.


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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to

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