topic Does Alabama tax teacher retirement from other states? in Retirement tax questions

Does Alabama tax teacher retirement from other states?

FormerUK — Thu, 06 Jun 2019 08:57:23 GMT

Some types of retirement income are taxed in Alabama. Inc...

AndreaC1 — Thu, 06 Jun 2019 08:57:25 GMT

Some types of retirement income are taxed in Alabama. Income from retirement accounts like an IRA or a 401(k) will be taxed as regular income, at Alabama’s state income tax rates. Tax rates range from 2% to 5%. More information can be found here https://revenue.alabama.gov/incometax/xempt.cfm

However, income from pensions is not taxed in Alabama. If you receive money from a public pension like the Teachers Retirement System or from a private company pension, that income will not be taxed by the state. There are five states that do not tax any teacher pensions and those include: Alabama, Hawaii, Illinois, Mississippi, and Pennsylvania.

The only states that do tax some or all of the income from an out-of-state teacher's pension are Kansas, Louisiana, Massachusetts, Michigan and New York.

NOTE: There is federal tax on pension benefits you receive. But in Alabama, pensions are tax exempt. That includes state pensions from various groups including state employees and teachers.

Re: Some types of retirement income are taxed in Alabama. Inc...

melindalangston — Sun, 24 Jan 2021 21:43:14 GMT

I just realized that my husbands pension from Retirement Systems of Alabama was reported as taxable income on our Turbo Tax Alabama Tax Return for at least 2018 and 2019, if not for more years, even though Turbo Tax says Alabama does not tax this income. I checked the list Turbo Tax provided of non taxable pension sources and Retirement Systems of Alabama is not on it. Is this why his income is reported as taxable or am I supposed to do something special, apart from answering the Turbo Tax questions correctly?

Re: Does Alabama tax teacher retirement from other states?

DianeW777 — Mon, 25 Jan 2021 14:03:55 GMT

Yes, you must answer the question in the Alabama (AL) state return about the pension.

As you go through the AL return, when you get to the retirement screen, you must select Edit beside the one from the AL Retirement System.

Once you do that, it will be nontaxable on the AL return. See the images below for your assistance.

Next, you will want to do an amended return for AL for both of the years you mention if the retirement payment was taxed in those years. They must be completed in the 2019 and 2018 TurboTax software as appropriate.

How to amend a return you already filed

Re: Does Alabama tax teacher retirement from other states?

cmking75 — Wed, 17 Mar 2021 20:25:02 GMT

Alabama does not tax teacher retirement from Alabama. The question concerns teacher retirement from other states if primary residence is now in Alabama. I retired from teaching in Georgia but now live in Alabama and file Alabama state income tax.

Re: Does Alabama tax teacher retirement from other states?

ThomasM125 — Wed, 17 Mar 2021 20:57:17 GMT

Only Alabama Teachers Retirement System benefits are excludable from tax for retired teachers in Alabama. So, your pension benefits are taxable.