Maryland Pension Exclusion

[ken-koroknay]

Here is a copy and paste from page 7 of the Maryland Tax Guide for 2020 tax filing:

Line 10a. PENSION EXCLUSION. You may be able to subtract
some of your taxable pension and retirement annuity income.
This subtraction applies only if:
a. You were 65 or over or totally disabled, or your spouse was
totally disabled, on the last day of the tax year, AND
b. You included on your federal return taxable income received
as a pension, annuity or endowment from an “employee
retirement system” qualified under Sections 401(a), 403 or
457(b) of the Internal Revenue Code. [A traditional IRA, a
Roth IRA, a simplified employee plan (SEP), a Keogh plan, an
ineligible deferred compensation plan or foreign retirement
income does not qualify.]

I would have to believe that your federal civil service pension is a qualified employee retirement system plan.  As long as you included your pension payment as income on your federal tax return and you are age 65 or older in the year you are filing your Maryland tax return (presumably 2020 tax filing) I think your pension qualifies.

[ThomasM125]

@ken-koroknay Yes, your federal pension would qualify for the pension exclusion in Maryland. About the only type of pension that does not qualify is a traditional IRA distribution.

[ken-koroknay]

Agree, generally speaking distributions from IRAs are not eligible for Maryland pension exclusion.  This should serve as a reminder for Marylanders to be very careful as they approach age 65 and decide to roll a 401(k) plan into a rollover IRA.   The 401(k) plan is considered an employer-based plan (similar to a pension plan) and eligible for pension exclusion.  Your IRA is not.  Once you roll 401(k) money out of such employer-based plan into a rollover IRA the money loses its pension exclusion eligibility.  (The money could regain its pension exclusion eligibility should the individual roll the money back into another employer's qualified 401(k) plan.)   If you don't draw your social security until age 66 or choose to put off taking it until up to age 70 and you don't have an employer provided pension plan (many of us don't), you might regret rolling any 401(k) money into an IRA as you won't have any retirement assets from which to draw in the year you turn 65 that will qualify for Maryland's pension exclusion.

[runpeterk-verizo]

I am curious if I rolled over my 401k into a rollover IRA account does this  count towards the Maryland pension exclusion