State Income Tax Exclusions

States with no state income tax

States that exclude all retirement income from state income tax

States with conditional rules for taxation of retirement income

Will/when will the Planner reflect the new Iowa tax legislation?

There are a wide variety of rules around state income taxes at all ages and this issue becomes more complicated in retirement. Some states have no income tax, others exclude all retirement income from state income tax, and yet others have conditional rules around retirement income.

When using the Planner you have the ability to select the tax treatment of your pensions and annuities, while the Planner will determine whether withdrawals from retirement accounts such as 401ks and IRAs are subject to income tax. For this reason, it's very important to take care when entering pension and annuity income.

Please see below to learn how the Planner treats retirement income such as withdrawals from retirement accounts such as 401ks and IRAs in your state.

The Planner will not apply state income tax to any income at any age in the following states:

The Planner will not apply state income tax to any retirement income such as withdrawals from 401ks and IRA after age 59.5 in the following states:

Certain states have conditional rules on taxing retirement income. We do not account for these exclusions in the Planner. For example:

In New York, taxpayers age 59 1/2 and older can exclude up to $20,000 of retirement income.

In New Jersey, taxpayers age 62 or older with New Jersey income of $150,000 or less can exclude some or all of their income from a pension, annuity, IRA, or other retirement plan. For taxpayers with gross income of $100,000 or less, the maximum exclusion is $100,000 for joint filers, $75,000 for single filers, and $50,000 for married taxpayers filing a separate return. For taxpayers with gross income between $100,001 and $125,000, the maximum exclusion is 50% of retirement income for joint filers, 37.5% of retirement income for single filers, and 25% of retirement income for married taxpayers filing a separate return. For taxpayers with gross income between $125,001 and $150,000, the maximum exclusion is 25% of retirement income for joint filers, 18.75% of retirement income for single filers, and 12.5% of retirement income for married taxpayers filing a separate return.

In South Carolina, taxpayers under 65 can exclude up to $3,000 of retirement income while taxpayers age 65 or older can exclude up to $10,000 of retirement income.

If you feel that the software overstates your State income tax, you may offset the tax by entering non taxable pension income or windfalls.