Military retirement pay incurs state tax in Alabama?

[bm72fb]

I'm inputting 1099-R from DFAS & the state refund amount updated after input.  We live in Alabama.  I thought military retirement pay is state tax exempt in Alabama.  Is that incorrect?

[SteamTrain]

I seem to recall that the military 1099-R exemption is handled during the AL interview.
..Finish all of your Federal stuff first, then look for a question about that retirement income during the AL interview.

[AnnS7 · Accepted solution]

Alabama does exempt military retirement from state taxes.  

Please follow these steps for correct reporting on the Alabama return:

• Sign in to your TurboTax account.
• Click on Take me to my return (orange button).
• Click on State Taxes tab.
• On the Status of your state returns click Continue button to right of Alabama return.
• Continue through to About Your Retirement Distributions screen.
• Click Edit button next to your Military Pension (in blue to the right).
• Click Yes on the Alabama Special Handling of This Distribution screen to the question Is your distribution from one of the pension plan systems that is not taxed by Alabama?

That should exempt your military retirement from Alabama taxes.

See screen shots below.