It depends. According to the New York State Department of Taxation and Finance:
Your pension income is not taxable in New York State when it is paid by:
- New York State or local government
- the federal government, including Social Security benefits
- certain public authorities
In addition, income from pension plans described in section 114 of Title 4 of the U.S. code received while you are a nonresident of New York State is not taxable to New York.
If your pension is taxable to New York and you are over the age of 59 ½ or turn 59 ½ during the tax year, you may qualify for a pension and annuity exclusion of up to $20,000. This exclusion from New York State taxable income applies to pension and annuity income included in your recomputed federal adjusted gross income. For more information on the pension exclusions and other benefits for retired people, see Publication 36, General Information for Senior Citizens and Retired Persons.
There is a reported issue with state exempt pensions. In order to get the calculation to work correctly, it has to be entered first on the federal side and then on the State.
Here are the steps to enter your exempt State employee pension:
On the Federal Income Tax portion:
- In the search or find box, type in 1099-R
- Click on Jump to 1099-R
- Scroll down to Retirement Plans and Social Security
- At IRA,401(k), Pension Plan Withdrawals (1099-R), click Start (or Update)
- Enter your 1099-R or if you have entered it, click on Edit then Continue
- Answer the next questions until you get to the Where Is This Distribution From? screen
- Select the source State Employees and enter the information requested:
- Click on Continue
- Click on From a Qualified Plan
- Continue answering the questions
On the State return portion:
- At the Changes to Federal Income page, scroll down to Received retirement income, click Start (or Update)
- At the Retirement Distributions Summary page, click on Edit State
- If no additional information is required, click on Continue
- Click on Done
