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There is no single state rule for retirement income. Social Security, pensions, 401(k) and IRA withdrawals, annuities, railroad benefits, and disability pensions can each receive different treatment. A state may exempt one category, partially exclude another, and tax a third. Your result can also depend on age, income, the pension’s source, residency, local taxes, and the tax year.
For 2026, the Connecticut General Assembly’s Office of Legislative Research reports that 33 states fully exempt Social Security benefits, seven provide a limited exemption, one provides no exemption, and nine jurisdictions do not impose a broad-based income tax. Those figures describe Social Security only; they do not mean that every other form of retirement income is tax-free.
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How state taxation of retirement income works
State income-tax systems generally start with some measure of federal adjusted gross income or federal taxable income, then apply state additions, subtractions, deductions, and credits. That means federal tax treatment is an important starting point but does not determine your state bill.
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The state-by-state overview cited for this guide separates three core categories—Social Security, pensions, and 401(k)/IRA distributions. Use it as a comparison starting point, then confirm the current-year instructions from the revenue department in the state where you are resident.
Social Security benefits
Social Security is the retirement-income category most often exempted by states, but “exempt” does not have one universal meaning. A full exemption removes benefits from state taxable income. A limited exemption may apply only below an income threshold, only to certain ages, or only up to a dollar cap. One state in the 2026 Connecticut report provides no exemption, while nine jurisdictions have no broad-based income tax through which these benefits would ordinarily be taxed.
2026 Social Security classifications
| Classification in the Connecticut General Assembly 2026 report | Number of states or jurisdictions | What the classification means |
|---|---|---|
| Full exemption | 33 states | Social Security benefits are fully excluded from the state income-tax base under the report’s classification. |
| Limited exemption | 7 states | Exclusion depends on conditions such as income, age, filing status, or a statutory dollar limit. |
| No exemption | 1 state | Benefits are not broadly exempt under that state’s income-tax rules. |
| No broad-based income tax | 9 jurisdictions | The jurisdiction does not impose a broad-based individual income tax that generally taxes these benefits. |
These counts are a national snapshot for the report’s stated scope and year. They do not replace the instructions for your state, particularly if you moved during the year, have other income, or are subject to a local income tax.
Pensions: public, private, military, and other plans
Pension treatment is more varied than Social Security treatment. States may distinguish among private defined-benefit pensions, pensions from the state’s own government, pensions from another state, federal civilian pensions, military retirement, and disability pensions. Some provide a broad subtraction; others offer an age- or income-based allowance; some exempt only specified public systems; and some include all or part of the payment in taxable income.
Private-sector pensions
A private pension can be fully taxable, partly excluded, or exempt under a state’s retirement-income subtraction. The rule may depend on your age, filing status, total income, or whether the payment qualifies as a recognized retirement benefit rather than a lump-sum or early distribution. Do not assume that a state’s treatment of public pensions applies to a private employer plan.
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State and local government pensions
States sometimes give special treatment to pensions paid by their own retirement systems or to pensions earned while working for another government. The distinction can matter after a move: a state may protect its own public pension but tax an equivalent benefit from another state, or it may provide a general public-pension exclusion subject to a cap.
Federal civilian and military pensions
Military retirement and federal civilian pensions are frequently addressed in separate provisions. A state may exempt all or part of military retirement, apply an age or income limit, or treat federal civilian benefits differently from military benefits. The existence of a federal exemption or exclusion does not automatically create a state exemption.
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Federal rules distinguish certain service-connected disability pensions and other disability payments from ordinary retirement benefits. State returns can make their own adjustments, so classify the payment using the benefit statement and the state’s instructions rather than relying only on the amount shown as federally taxable.
401(k), 403(b), IRA, and other retirement-account withdrawals
Traditional 401(k) and IRA withdrawals are often included in state taxable income because they are commonly included in federal income. However, states may subtract some or all qualifying distributions, impose an age or income test, or provide a separate retirement-income deduction. A state’s treatment of a pension therefore cannot be used to predict its treatment of an IRA or 401(k).
Employer plans
Employer-plan distributions can include defined-contribution accounts, 401(k) plans, 403(b) plans, and other qualified arrangements. Check whether the state’s subtraction covers the specific plan and whether it applies to periodic payments, lump sums, or both. Early distributions may be subject to different rules from regular retirement payments.
Traditional IRAs
Traditional IRA withdrawals may be taxable to the state to the extent they are taxable federally, unless the state provides a subtraction. Some states coordinate the subtraction with age, income, or the amount of previously taxed contributions. Keep records of basis and prior state taxation when a distribution includes nondeductible contributions.
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Roth accounts and conversions
Roth distributions and Roth conversions can create state-specific questions even when federal taxable income is low or zero. A conversion may be included in state income in the conversion year, while a qualified Roth distribution may be excluded. State instructions can also address contributions that were taxed differently in earlier years. Verify the rule for the tax year of the transaction before filing.
Illinois example
The Illinois Department of Revenue says Illinois does not tax listed federally taxed amounts received from qualified employee benefit plans, IRAs, government retirement and disability plans—including military plans—and railroad retirement income. That is an example of a broad state exclusion, not a rule that can be applied to another state.
Railroad retirement and annuity income
Railroad retirement has multiple federal components, and the Internal Revenue Service’s Publication 575 (2025) distinguishes types of railroad benefits and related pension and annuity payments. State treatment may follow those distinctions or apply a separate subtraction. Identify the component shown on your benefit statement and read the state’s definition of qualifying railroad income.
Annuities also require care. A state may tax the taxable portion of an annuity, exempt qualifying retirement annuities, or apply a general retirement-income allowance. The source of the annuity, your investment in the contract, and whether payments are immediate or deferred can affect the state calculation.
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State examples that show why the category matters
Michigan: qualifying benefits and changing tax years
Michigan Department of Treasury guidance says retirement and pension benefits include most income reported on Form 1099-R for federal tax purposes. Its instructions describe subtraction rules for qualifying benefits and tax-year-specific changes, including provisions affecting some taxpayers in 2026 through 2028. A Michigan filer should use the instructions for the exact year being filed and confirm whether the Form 1099-R payment meets the state definition.
Tennessee: no broad-based tax on these categories
Tennessee Department of Revenue guidance (HIT-18) states that Tennessee’s income-tax framework does not tax Social Security, pensions, IRA and 401(k) distributions, or annuity distributions. The department explains that because Tennessee does not impose an income tax on salaries and wages, these items of income are also not subject to state tax. This is a state-specific result; other taxes and federal income tax can still apply.
How to determine your result in any state
- List each payment separately. Record Social Security, each pension, military or federal retirement, railroad benefits, IRA withdrawals, 401(k) or other plan distributions, annuities, disability benefits, and any Roth conversion as separate lines.
- Identify the federal tax treatment. Use Forms SSA-1099, 1099-R, 1099-RRB, and your federal return to determine what was included in federal income. Note the taxable and nontaxable portions and any basis.
- Confirm residency and tax year. Use the rules for the state in which you were resident for the relevant period. A part-year move can require allocation between states, and a rule effective in 2026 may not apply to a 2025 return.
- Read the state’s current individual-income-tax instructions. Search for the exact terms “Social Security,” “pension,” “retirement subtraction,” “Form 1099-R,” “military,” “railroad,” “annuity,” and “disability.”
- Apply eligibility limits. Check age, adjusted gross income, filing status, source of the pension, dollar caps, and whether the subtraction is limited to qualifying plans.
- Check additions and local taxes. A state may add back an item excluded federally, and a city or locality may impose its own income tax even when the state does not tax the payment.
- Keep supporting records. Save benefit statements, plan documents, prior returns showing basis, and calculations supporting any subtraction. They may be needed if the state asks why federal and state taxable income differ.
Comparing two states before a move
Compare the same facts in both states rather than relying on a general label such as “retirement-tax friendly.” Build a side-by-side worksheet with these rows:
- Social Security: full, limited, or no exemption.
- Private pension income and employer-plan distributions.
- Public pensions, including benefits from a former state employer.
- Military and federal civilian retirement.
- Railroad retirement components.
- Traditional IRA, 401(k), and other account withdrawals.
- Roth conversions and Roth distributions.
- Annuity income and disability benefits.
- Age, income, filing-status, and dollar limits.
- Effective tax year, part-year residency rules, and local income taxes.
Then calculate the state taxable amount for your actual mix of income. A state that fully exempts Social Security may still tax a large traditional IRA withdrawal, while a state that taxes some pensions may offer a generous account-distribution subtraction.
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Assuming federal taxability equals state taxability
Federal taxable income is only the starting point. State additions and subtractions can produce a different result.
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Applying a neighboring state’s rule
Retirement provisions are enacted separately by each state. Verify the rule where you file, even when the states have similar names for their deductions.
Ignoring the payment’s source
Public, private, military, railroad, and disability benefits may occupy different sections of the return. Use the payer and benefit type shown on your statement.
Using an outdated instruction booklet
Michigan’s 2026–2028 changes illustrate why the effective year matters. Download the current-year instructions from the state revenue department before filing.
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Forgetting local income tax
A state exemption does not necessarily eliminate a city or county income-tax obligation. Check local rules separately when you live or work in a taxing locality.
What the national picture does—and does not—tell you
The 2026 Social Security count is useful for understanding the national direction: most states fully exempt benefits, several impose conditions, one does not provide a broad exemption, and nine jurisdictions do not have a broad-based income tax. It does not establish how many states tax every pension type or every retirement-account distribution. No single national table independently verifies every category for every state and every 2026 filing situation.
For an individual return, the controlling documents are the current instructions and publications issued by the revenue department of the state of residence, together with the taxpayer’s payment records. That is especially important for military or public-service benefits, a pension from a former state employer, a Roth conversion, an early distribution, or a move during the tax year.
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