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14 States That Won’t Tax Your Pension

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Congratulations if you’re one of the lucky few who still have a traditional pension (a.k.a., a defined benefit plan). But once you’ve retired, remember that Uncle Sam generally taxes payments from pensions as ordinary income.

Will your state tax your pension income, too? It depends on where you live. Most states tax at least a portion of income from private-sector defined benefit plans. Your state might have a pension exclusion, but chances are it’s limited based on your age and/or income. However, a handful of states don’t tax pension income at all, no matter how old you are or how much money you have. Good for you if you retire in one of those states!

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But, of course, just because a state doesn’t tax your pension doesn’t mean it won’t tax some other form of income you’re counting on in retirement. Alabama, for example, doesn’t tax pensions or Social Security benefits, but it will tax distributions from a 401(k) plan. Bottom line: Make sure you check out a state’s overall tax environment for retirees before relocating there for your golden years.

Take a look at the 14 states that don’t tax pension income (states are listed alphabetically).

SEE ALSO: How All 50 States Tax Retirees

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