Alabama considers income from many retirement plans to be excludable from tax, but you have to manually indicate that the plan qualifies to be excluded.
Enter the Alabama state interview and proceed to the screen entitled "About Your Retirement Distributions". The table will have one entry for each 1099-R that you have entered into the federal return.
For each pension, click on Edit in order to indicate whether the plan is taxable in Alabama or not. Be sure to click on the entry for your military retirement.
When you click on the first pension, you will be presented with a new screen for each pension. The screen is asking if your pension is any one of these types. Note the "Military Retirement Pay", which was the point of the discussion above.
Answer "yes" at the bottom of the page. You will be returned to the previous screen with the Alabama income set to zero for this item, i.e., not taxable.
Did you not see this in the Alabama interview?
NOTE: You may have an issue if you did the Alabama return BEFORE entering your military pension (that's why this screen says "Be sure to complete retirement distribution entries on your federal return prior to making changes to this information on Alabama.")
Did you do Alabama before entering your 1099-R for the military pension?
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