Pa state tax on pension

[bunkp2]

Why do I have to pay tax on my pensiom

[re2boys · Accepted solution]

During the PA interview, you will be asked what type of retirement plan distribution is represented by each 1099R.

If box 7 on the 1099R is coded 4 or 7, it is not taxable.  If it coded with an "A" such as 1A or 4A or 7A, it is from a commercial annuity and is taxable same as federal.

If it coded a 1 or 2 it is an early distribution and is taxable to the extent it exceeds your basis in the plan.  Your basis in the plan is the sum of all contributions you made over the years less all previous distributions from the plan.  You may need to ask the plan administrator for this information.

[ToddL]

You probably don't have to pay PA tax on your pension, but you will need to complete the PA state return interview.

Most pensions are excluded from PA Income Tax - see the attached list.