Whether or not your distribution was for an RMD is not relevant. Whether your distribution from your 403(b) plan depends on two factors, your age and the type of retirement plan. According to Kiplingers:
Taxpayers Born Before 1946: Income from federal and Michigan government retirement plans is exempt. Government pensions from other states are also exempt if the other state does not tax Michigan government pensions. In addition, up to $51,570 of income from private retirement plans is exempt (up to $103,140 for joint filers). Taxpayers can also deduct up to $11,495 of interest, dividends, and capital gains (up to $22,991 for joint filers).
Taxpayers Born Between 1946 and 1952: Up to $20,000 of income from a retirement plan is exempt (up to $40,000 for joint filers). Once these taxpayers turn 67 years old, the retirement income exemption is replaced with a $20,000 standard deduction against all income ($40,000 for joint filers). The standard deduction is reduced by any deductions taken for military or railroad retirement benefits. Retirees with pension benefits from employment with a government entity that was exempt from the Social Security Act have higher exemption and deduction limits.
Taxpayers Born After 1952: Retirement income is generally not exempt (although pension income from employment with a government entity that was exempt from the Social Security Act may be deductible). However, once these taxpayers turn 67 years old, they can either (1) claim personal exemptions and deduct Social Security, military, and railroad retirement income, or (2) deduct $20,000 from all income sources ($40,000 for joint filers).
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