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.
State | Pensions Tax Status | Income Tax Rate | Social Security Tax Status | Military Retirement Tax Status |
---|---|---|---|---|
Alabama | No | 2% | No | No Tax |
Alaska | No | 0% | No | No Tax |
Florida | No | 0% | No | No Tax |
Hawaii | No | 1.4% | No | No Tax |
Illinois | No | 4.95% | No | No Tax |
Mississippi | No | 4% | No | No Tax |
Nevada | No | 0% | No | No Tax |
New Hampshire | No | 5% | No | No Tax |
Pennsylvania | No | 3.07% | No | No Tax |
South Dakota | No | 0% | No | No Tax |
Tennessee | No | 0% | No | No Tax |
Texas | No | 0% | No | No Tax |
Washington | No | 7% | No | No Tax |
Wyoming | No | 0% | No | No Tax |
Arizona | Yes | 2.59% | No | No Tax |
Arkansas | Yes | 2% | No | No Tax |
California | Yes | 1% | No | Fully Tax |
Colorado | Yes | 4.55% | Yes | Partial Exemptions |
Connecticut | Yes | 3% | Yes | No Tax |
Delaware | Yes | 2.2% | No | Partial Exemptions |
Georgia | Yes | 1% | No | Partial Exemptions |
Idaho | Yes | 1% | No | Partial Exemptions |
Indiana | Yes | 3.23% | No | No Tax |
Iowa | Yes | 0.33% | No | No Tax |
Kansas | Yes | 3.1% | Yes | No Tax |
Kentucky | Yes | 5% | No | Partial Exemptions |
Louisiana | Yes | 1.85% | No | No Tax |
Maine | Yes | 5.8% | No | No Tax |
Maryland | Yes | 2% | No | Partial Exemptions |
Massachusetts | Yes | 5% | No | No Tax |
Michigan | Yes | 4.25% | No | No Tax |
Minnesota | Yes | 5.35% | Yes | No Tax |
Missouri | Yes | 1.5% | No | No Tax |
Montana | Yes | 1% | Yes | Partial Exemptions |
Nebraska | Yes | 2.46% | Yes | No Tax |
New Jersey | Yes | 1.4% | No | No Tax |
New Mexico | Yes | 1.7% | Yes | Partial Exemptions |
New York | Yes | 4% | No | No Tax |
North Carolina | Yes | 4.99% | No | No Tax |
North Dakota | Yes | 1.1% | Yes | No Tax |
Ohio | Yes | 2.77% | No | No Tax |
Oklahoma | Yes | 0.25% | No | Partial Exemptions |
Oregon | Yes | 4.75% | No | Partial Exemptions |
Rhode Island | Yes | 3.75% | Yes | Partial Exemptions |
South Carolina | Yes | 0% | No | Partial Exemptions |
Utah | Yes | 4.95% | Yes | No Tax |
Vermont | Yes | 3.35% | Yes | Fully Tax |
Virginia | Yes | 2% | No | Fully Tax |
West Virginia | Yes | 3% | Yes | No Tax |
Wisconsin | Yes | 3.54% | No | No Tax |
Pensions Tax Status by State
Alabama
Pensions Tax Status
No
Ranked in the US
#21
Alaska
Pensions Tax Status
No
Ranked in the US
#1
Arizona
Pensions Tax Status
Yes
2.59%
Ranked in the US
#27
Arkansas
Pensions Tax Status
Yes
Ranked in the US
#22
California
Pensions Tax Status
Yes
Ranked in the US
#11
Fully Tax
Colorado
Pensions Tax Status
Yes
4.55%
Ranked in the US
#41
Partial Exemptions
Connecticut
Pensions Tax Status
Yes
Ranked in the US
#29
Delaware
Pensions Tax Status
Yes
2.2%
Ranked in the US
#25
Partial Exemptions
Florida
Pensions Tax Status
No
Ranked in the US
#2
Georgia
Pensions Tax Status
Yes
Ranked in the US
#12
Partial Exemptions
Hawaii
Pensions Tax Status
No
1.4%
Ranked in the US
#16
Idaho
Pensions Tax Status
Yes
Ranked in the US
#13
Partial Exemptions
Illinois
Pensions Tax Status
No
4.95%
Ranked in the US
#43
Indiana
Pensions Tax Status
Yes
3.23%
Ranked in the US
#33
Iowa
Pensions Tax Status
Yes
0.33%
Ranked in the US
#10
Kansas
Pensions Tax Status
Yes
3.1%
Ranked in the US
#32
Kentucky
Pensions Tax Status
Yes
Ranked in the US
#46
Partial Exemptions
Louisiana
Pensions Tax Status
Yes
1.85%
Ranked in the US
#20
Maine
Pensions Tax Status
Yes
5.8%
Ranked in the US
#50
Maryland
Pensions Tax Status
Yes
Ranked in the US
#23
Partial Exemptions
Massachusetts
Pensions Tax Status
Yes
Ranked in the US
#47
Michigan
Pensions Tax Status
Yes
4.25%
Ranked in the US
#40
Minnesota
Pensions Tax Status
Yes
5.35%
Ranked in the US
#49
Mississippi
Pensions Tax Status
No
Ranked in the US
#38
Missouri
Pensions Tax Status
Yes
1.5%
Ranked in the US
#18
Montana
Pensions Tax Status
Yes
Ranked in the US
#14
Partial Exemptions
Nebraska
Pensions Tax Status
Yes
2.46%
Ranked in the US
#26
Nevada
Pensions Tax Status
No
Ranked in the US
#3
New Hampshire
Pensions Tax Status
No
Ranked in the US
#48
New Jersey
Pensions Tax Status
Yes
1.4%
Ranked in the US
#17
New Mexico
Pensions Tax Status
Yes
1.7%
Ranked in the US
#19
Partial Exemptions
New York
Pensions Tax Status
Yes
Ranked in the US
#39
North Carolina
Pensions Tax Status
Yes
4.99%
Ranked in the US
#45
North Dakota
Pensions Tax Status
Yes
1.1%
Ranked in the US
#15
Ohio
Pensions Tax Status
Yes
2.77%
Ranked in the US
#28
Oklahoma
Pensions Tax Status
Yes
0.25%
Ranked in the US
#9
Partial Exemptions
Oregon
Pensions Tax Status
Yes
4.75%
Ranked in the US
#42
Partial Exemptions
Pennsylvania
Pensions Tax Status
No
3.07%
Ranked in the US
#31
Rhode Island
Pensions Tax Status
Yes
3.75%
Ranked in the US
#36
Partial Exemptions
South Carolina
Pensions Tax Status
Yes
Ranked in the US
#4
Partial Exemptions
South Dakota
Pensions Tax Status
No
Ranked in the US
#5
Tennessee
Pensions Tax Status
No
Ranked in the US
#6
Texas
Pensions Tax Status
No
Ranked in the US
#7
Utah
Pensions Tax Status
Yes
4.95%
Ranked in the US
#44
Vermont
Pensions Tax Status
Yes
3.35%
Ranked in the US
#34
Fully Tax
Virginia
Pensions Tax Status
Yes
Ranked in the US
#24
Fully Tax
Washington
Pensions Tax Status
No
Ranked in the US
#51
West Virginia
Pensions Tax Status
Yes
Ranked in the US
#30
Wisconsin
Pensions Tax Status
Yes
3.54%
Ranked in the US
#35
Wyoming
Pensions Tax Status
No
Ranked in the US
#8