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Tax Year 2006


State Tax on Federal & Other Retirements




State (Only) Sales Tax by Percent

*5%-6% Effective January 1, 2006, the Sales Tax and Use Tax is reduced to 5% on the sales, purchases and uses of food and food ingredients intended for human consumption. The reduced rate of tax does not apply to sales, purchases and uses by consumers of prepared food.
**4%-6% depending on the county in which the taxable sale or service occurs.

States with No Personal Income Taxes:

Alaska

Florida (1)

Nevada
New Hampshire (2)

South Dakota

Tennessee (3)
Texas

Washington


States Exempting all Federal Civil Service Income:

Alabama

Hawaii

Illinois

Kansas
Kentucky (4)

Louisiana

Massachusetts (5)

Michigan
Mississippi

New York

North Carolina (6)

Oregon (7)
Pennsylvania

Wisconsin (8)
 
(1) FL: Value of stocks, bonds, mutual funds, etc., taxed. See below for details.
(2) NH: 5% tax on interest/dividend income that exceeds $2,400 (single) or $4,800 (couple).
(3) TN: Certain interest/dividend income taxed at 6% if it exceeds $1,250 (single) or $2,500 (couple).
(4) KY: Total amount is exempt only if retired before January 1, 1998. See below for retirements after December 31, 1997.
(5) MA: Tax rate on ordinary income including interest and dividends is 5.3%.
(6) NC: Annuities not taxed beginning with 1998 if individual had five years of government service as of August 12, 1989.
(7) OR: Annuities of those who retired before October 1, 1991, are not taxed. Those who retired after October 1, 1991, are taxed only on that portion of the annuity attributable to government service after October 1, 1991.
(8) WI: Full exemption if benefits received from a retirement account established before 1964.

Other Exemptions:

Note: SS=Social Security; RR= Railroad Retirement; AGI= Adjusted Gross Income

Arizona: $2,500 exclusion for federal & AZ state and local pensions. All residents receive a $2,100 personal exemption. In addition, all residents 65+ receive a $2,100 exemption.

Arkansas: In addition to the $6,000 exemption provided for distributions received from employment-related pension plans, the cost recovery adjustment calculated pursuant to IRC 72, using the simplified worksheet found in the federal return, is applicable to Arkansas returns filed for 2003 and subsequent years. The total exemption allowable for employer-sponsored pension plans and/or IRAs is $6,000 per taxpayer. All residents 65+ receive an additional $21 exemption. Special Note: If your original cost of contribution was fully recovered as part of the McFadden v. Weiss lawsuit, you are not eligible to claim IRC 72 recovery.
Arkansas law provides that the first $6,000 of benefits received from public or private employment-related retirement systems, plans or programs, regardless of the method of funding, shall be exempt from income tax. This exemption also applies to distributions from IRA's when the taxpayer qualifies either by age, death, or disability.

California: Personal and age 65+ exemption of $87 each.

Colorado: $20,000 exemption for all taxpayers 55-64. $24,000 exemption for all taxpayers 65+. Colorado follows federal rules, exempts U.S. government interest, and taxes municipal interest earned from states other than Colorado.

Connecticut: Personal exemptions of up to $12,000 (married filing separately) $12,625 (single), $19,000 (head of household), and $24,000 (married filing jointly). Tax credits up to 75% depending on income level. SS benefits are tax-exempt if federal AGI is less than $50,000 (single or married filing separately) or less than $60,000 (married filing jointly or head of household). The amount of taxable benefits is reduced for those with AGI above those levels.

Delaware: $2,000 pension exclusion ($12,500 for those 60+). Additional personal credit of $110 for those 60+. In addition, all residents 60+ or totally disabled get a $2,000 exemption if earned income is less than $2,500 and AGI is under $10,000 (Figures double if married). Delaware exempts SS and RR pension income.

District of Columbia: Two provisions: (1) $3,000 pension exclusion if 62+; and (2) an additional exemption of $1,370 for all residents (not just pension recipients) 65+. SS income is excluded from taxable income.

Florida: The exemption for individual and joint filers for Florida Intangible Tax is, respectively, $250,000 and $500,000. Every natural person is entitled each year to an exemption of the first $250,000 of the value of property otherwise subject to the annual tax. In addition, a husband and wife filing their Intangible Tax return jointly, shall have an exemption of $500,000. For 2005, intangible assets are still taxed at $1 per thousand dollars of taxable value. Florida does not tax unearned income such as interests, dividends, etc.

Georgia: SS benefits exempt from state tax. $25,000 retirement income exclusion if 62+ or totally disabled. (Effective January 2007, this exclusion will increase to $30,000 and then to $35,000 in January 2008).

Hawaii: SS benefits and First Tier Railroad Retirement Act benefits are not taxable. Residents are allowed a personal exemption of $1,040 per person plus an additional $1,040 per person for those 65+. This applies only to the taxpayer or the taxpayer?s spouse.

Idaho: Exclusions (minus SS received) for those 65+ or 62+ and disabled; $23,268 (single); $34,902 (married couple). Exclusion changes for military pension each year.

Indiana: $2,000 pension exclusion if 62+ (minus SS and RR). No pension exclusion allowed for survivor annuitants of civil service annuities. In addition, all residents 65+ receive a $1,000 personal exemption or $1,500 if federal AGI is less than $40,000.

Iowa: Exemptions are $6,000 (single), $12,000 (joint) for disabled and those 55+. There is also a $20 personal exemption credit for 65+.



Kentucky: With retirements after January 1, 1998, some of the civil service annuity will be taxed. The percentage will be based on number of years of government service before 1/1/98 and total years worked. All residents receive an exclusion of up to $41,110 of taxable pension benefits.

Maine: A pension income deduction can be taken on line 15 of the long tax form or line 14 or the short form, but you must also fill out the Worksheet for Pension Income Deduction to determine the eligibility amount. There is an additional standard deduction for 65+ of $1,250 (single), $1,000 (married) and $2,000 (couple).

Maryland: Pension exclusion up to $21,500 for those 65+ or totally disabled, reduced by SS or RR benefits. In addition, all residents 65+ receive a personal exemption of $1,000.

Massachusetts: An exemption of $700 is available for individuals who have reached the age of 65 by 1/1/05. This exemption is in addition to the personal exemption of $3,300 (single), $5,100 (head of household) and $6,600 (married/joint filing).

Michigan: Private retirement income included in AGI is deductible up to $39,570 (single) and $79,140 (joint). The allowable private pension deduction amount is reduced by the amount of exempt public pension income. Retirement income does not include payments made before the individual was eligible to retire under the provisions of the plan. Such payments are taxable. Seniors (65+) are allowed an additional exemption of $2,000 for tax year 2005. A deduction for taxpayers ages 65 and over is allowed for income from dividends, interest and capital gains included in AGI up to $8,828 (single) and $17,655 (joint). The allowable deduction is reduced by all pension deductions from AGI, public and private.

Minnesota: Single 65+ or disabled have some income excluded if federal AGI is under $33,700 and non-taxable SS is under $9,600. For a couple, the limits are $42,000 AGI and $12,000 non-taxable SS.

Mississippi: $12,000 exemption for married filing jointly. All residents 65+ receive an additional $1,500 exemption.

Missouri: Up to $6,000 exemption for each filer falling below the AGI limitation of $25,000 (single) $16,000 (married filing separate), and $32,000 (married filing jointly). The $6,000 must be decreased dollar for dollar by the amount the income exceeds the income limitation. For example, a single filer would be completely phased out at $31,000 (individual), a married couple filing separately at $22,000. For a married couple filing jointly, if both had pensions of $6,000 or greater, the exemption phases out completely at $44,000. If only one had a $6,000 pension, the phase out is $38,000.

Montana: $3,600 pension exclusion for those with AGI below $30,000, reduced $2 for every $1 over $30,000. All residents 65+ receive an additional personal exemption of $1,900; indexed annually for inflation. Tier I and II RR benefits are fully exempt.

Nebraska: Tier I and II RR benefits are fully exempt.

New Jersey: Exclusion is $15,000 (single), $10,000 (married filing separately), or $20,000 (married filing jointly), for annuitants 62+ or disabled according to SS guidelines. These exclusions are eliminated for taxpayers with NJ gross income over $100,000. An additional $3,000 ($6,000 joint) can be deducted if ineligible for SS and RR. All residents 65+ receive a $1,000 personal exemption. Under NJ?s 3-Year Rule, annuities are not taxed until total employee contributions to civil service retirement have been recovered.

New York: In addition to the exemption for pensions of New York State, local governments, and the federal government, there is an additional pension and annuity income exclusion of up to $20,000 available to persons 59 ½ or more. Also, SS benefits are exempt from New York State and local tax. For additional information, see Publication 36, ?General Information for Senior Citizens and Retired Persons,? available at www.nystax.gov.

New Mexico: Exemptions for all residents 65+. $8,000 for those with AGI less than $18,000; exemption reduces as income increases?no exemptions above $51,000.

North Carolina: Exclusion of up to $4,000 retirement income from a government source, if you did not have 5 years of creditable service as of 8/12/89; 65+ receive an addition of $750 (single) or $1,200 ($600 each for a couple if both 65+) to the regular standard deduction.

North Dakota: Pension exclusion up to $5,000, reduced by any SS benefits. It is available only on the state?s ND-2 individual form; no exclusion offered on the ND-1 individual form.

Ohio: Graduated retirement income credit ranging from $0 for annuities less than $500, to $200 for annuities exceeding $8,000. $50 tax credit per return for residents 65+.

Oklahoma: Federal, military and OK government retiree exclusion of $7,500. $7,500 other pension exclusion with modified AGI limit $37,500 (single) or $75,000 (joint). Additional $1,000 exemption for legally blind or 65+ under certain income limits.

Oregon: Additional standard deduction for 65+ $1,200 (single), $1,000 each spouse 65+ (joint). Some retirement income credit for 62+ with income under $22,500 (single), $45,000 (joint).

South Carolina: $3,000 retirement deduction at any age, $10,000 for 65+. $15,000 deduction for each taxpayer 65+ by end of tax year against any South Carolina taxable income (reduced by $10,000 retirement deduction above). SS and RR benefits are not taxed by South Carolina. Income from retirement due to total and permanent disability is deductible. South Carolina has no property tax on intangibles.

South Dakota: No tax on unearned income such as interest, dividends, etc.

Tennessee: Persons 65+ are tax-exempt, if total annual income, from any and all sources, is $16,200 or less (single), or $27,000 or less (joint?no matter which spouse is 65+). An income tax return must be filed, each year, to claim this exemption. Annuities and other retirement funds, i.e. 401(k) and the federal Thrift Savings Plan, all are not taxable. Only certain types of interest and dividend income are taxable. For more details go to http://www.tennessee.gov/revenue/tntaxes/indinc.htm

Texas: No tax on unearned income such as interest, dividends.

Utah: $7,500 retirement income exemption per retiree if 65+, $4,800 if under 65. Reduced $0.50 for every $1 of federal AGI, plus any lump-sum distribution reported on federal form 4972, plus any interest on line 8b of the federal forms 1040A or 1040 that exceed $25,000 (single), $16,000 (married filing separately), $32,000 (married filing jointly, head of household, or qualifying widow (er)).

Virginia: $6,000 subtraction on income tax return for residents age 64 by midnight January 1, 2006. $12,000 for residents age 65+; additional $800 personal exemption if 65+. VA law exempts SS and Tier I RR benefits from taxation. Individuals may also deduct long-term health care insurance premiums, provided the premiums have not been deducted for federal income tax purposes. The premiums must be paid specifically for a long-term health care policy.

West Virginia: $2,000 pension exclusion. Residents age 65+ may exclude a total of $8,000, including the $2,000 pension exclusion.

Wisconsin: In addition to the exemption for benefits from an account established before 1964, for taxable years beginning in 2002 and after, all retirement payments received from the U.S. government that relate to the Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, or the commissioned corps of the Public Health Service are exempt from Wisconsin income tax. An additional personal exemption of $250, if 65+.

Wyoming: No personal or corporate income tax. No tax on intangible assets such as bank accounts, stocks, and bonds or on unearned income, such as interest and dividends. In addition, Wyoming does not assess any tax on retirement income earned and received from another state.