Why does my alabama state return include my military retirement pay as taxable when your forms later say it is not taxable?

[BMcCalpin · Accepted solution]

Because Alabama does tax some retirement programs, you need to manually indicate that your retirement distributions are not taxable.

When you go through the Alabama interview, if you have entered a 1099-R of any sort, your will see a screen entitled "About Your Retirement Distributions" (see first screenshot below).

Click the Edit button to the right of the distribution you want to alter.

This should give you a new screen called "Alabama Special Handling of This Distribution" (see second screenshot).

At the bottom of this screen, if your distribution qualifies to be non-taxable in Alabama, you can answer the question "Is your distribution from one of the pension plan systems that is not taxed by Alabama?" with a "yes".

Then you are returned to the screen with the table of distributions, only this time, you will see that the Alabama income is zero.

Please ignore the red arrow on the second screenshot, it was for another user, but the screen is the same as what you will see.