Breaks on pensions
It seems that some states also offer breaks on pensions, as long as they’re not 401(k) or IRAs. Alabama has a total of 5 percent income tax, and income from pensions is usually exempt.
Income from defined contribution plans, like IRAs, isn’t completely exempt, but the good news: starting in 2023, there will be a $6,000 annual exemption. Hawaii has a whopping 11 percent top income tax but doesn’t have any tax pension distributions. You will have to pay taxes on your contributions, and any other gains from those contributions when you take the withdrawals.
As for other states, they seem to limit how much retirement income is taxable. For instance, Arkansas exempts $6,000 of private or public employee retirement income, but also all military and railroad retirement income.
1 thought on “7 States That Don’t Tax Your Pension, 401(k), Social Security, and More”
Why can’t Virginia be one of the; NO TAX STATE!!! Is it because it’s so close to D.C.???