States That Don’t Tax Pensions

Introduction

A pension is a type of fund that an employee makes payments toward, from a portion of their earned income, while being employed by that particular company they’re working for. In short, a pension fund is a way for people to save money so that after they retire, they’ll have a sum of money to live on. 

After retirement, a person’s pension will pay them out a predetermined allotment of money every month until that person dies. The quantity of money that accrues in your pension is determined by a few factors, such how many years you worked and how high your salary was during those years. Generally speaking, the longer a person works and the higher they’re paid, the larger their pension will be when they eventually retire. 

Depending on which state a person lives in, their pension might or might not be taxed to varying degrees. A little more than half of the states within the U.S. tax at least some of their constituent’s pensions. Often, however, states that only partially tax a person’s pension have limits in place regarding how much of the pension can be taxed. As an example, the state of Iowa lets joint filers who are older than 55 years of age exclude $12,000 from being taxed. 

Learn more about states that don’t tax pensions by browsing the data in the charts.