Q. Do you know if I will have to pay Arizona income taxes on my FERS retirement benefit (Postal Service)? I am not disabled. I know I am exempt from federal income tax here in Arizona.
A. Whoa, Nelly! You AREN’T exempt from federal income tax in Arizona. You’re required to pay that like any other citizen of the U.S.
Now on to your question. Yes, you will pay state income tax on your FERS annuity. The state of Arizona doesn’t exempt federal retirement annuities, either wholly or in part.