Why is 1099-R military retirement pay calculated as taxable in AL? I had this problem in 2017, and had to manually go into the AL state form to fix this. Why?

[billcarson]

I have to manually go into the AL tax form to delete the 1099-R military retirement amount listed as income, which is dumb.  Once I enter my 1099 amount, my AL tax return amount goes from $1693 to Owing $85, a difference of $1778.  This is wrong.  Alabama does NOT tax military retirement.  This problem is the same as in 2017. Thought TurboTax would have fixed this by now?

[BMcCalpin · Accepted solution]

Some pensions in Alabama are taxable; you need to tell TurboTax what kind of pension it is so that TurboTax can determine if the pension is taxable or not.

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. 

When you click on the first pension, you will be presented with a new screen that is similar to the screenshot that is attached. The screen is asking if your pension is any one of these types.

If your pension plan is any of these types, then 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.