The Foreign Service Journal, January-February 2020

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2020 83 2019 STATE PENSION AND ANNUITYTAX The laws regarding the taxation of Foreign Service annuities vary greatly from state to state. In addition to those states that have no income tax or no tax on personal income, there are several states that do not tax income derived from pen- sions and annuities. For example, Idaho taxes Foreign Service annuities while exempting certain categories of Civil Service employees. Several websites provide more information on individual state taxes for retirees, but the Retirement Living Information Center at www.retirementliving.com/taxes-by- state is one of the more comprehensive and is recommende d for further information. ALABAMA Social Security and U.S. government pensions are not taxable. The combined state, county and city general sales and use tax rates range from 7 percent to as much as 8.65 percent. ALASKA No personal income tax. Most municipalities levy sales and/or use taxes of between 2 and 7 percent and/or a property tax. If over 65, you may be able to claim an exemption. ARIZONA U.S. government pensions are fully taxed, but up to $2,500 may be excluded for each taxpayer. There is also a $2,100 exemption for each taxpayer age 65 or over. Social Security is excluded from taxable income. Arizona state sales and use tax is 5.6 percent, with additions depending on the county and/or city. ARKANSAS The first $6,000 of income from any retirement plan or IRA is exempt (to a maximum of $6,000 overall). Social Security is excluded from taxable income. There is no estate or inheritance tax. State sales and use tax is 6.5 percent; city and county taxes may add another 5.5 percent. CALIFORNIA Pensions and annuities are fully taxable. Social Security is excluded from taxable income. The sales and use tax rate varies from 7.25 percent (the statewide rate) to 11 percent in some areas. CA Pub 71 lists all rates statewide. COLORADO Up to $24,000 of pension or Social Security income can be excluded if individual is age 65 or over. Up to $20,000 is exempt if age 55 to 64. State sales tax is 2.9 percent; local additions can increase that to as much as 11.2 percent. CONNECTICUT Pensions and annuities are fully taxable for residents. Social Security is exempt if Federal Adjusted Gross Income is less than $50,000 for singles or $60,000 for joint filers. Statewide sales tax is 6.35 percent. No local additions. DELAWARE Government pension exclu- sions per person: $2,000 is exempt under age 60; $12,500 if age 60 or over. There is an additional stan- dard deduction of $2,500 if age 65 or over if you do not itemize. Social Security is excluded from taxable income. Delaware does not impose a sales tax. DISTRICT OF COLUMBIA Pensions and annuities are fully taxed for residents. Social Security is excluded from taxable income. Sales and use tax is 5.75 percent, with higher rates for some commodities (e.g., liquor, meals). FLORIDA There is no personal income, inheritance, gift tax or tax on intangible property. All property is taxable at 100 percent of its just valuation, but many exemptions are available. The state sales and use tax is 6 percent. There are additional county sales taxes, which could make the combined rate as high as 9.5 percent. GEORGIA Up to $35,000 of retire- ment income may be excludable for those age 62 or older or totally dis- abled. Up to $65,000 of retirement income may be excludable for taxpayers who are 65 or older. Social Security is excluded from taxable income. Sales tax is 4 percent statewide, with additions of up to 3 percent depending on jurisdiction. HAWAII Pension and annuity distri- butions from a government pension plan are not taxed. Social Security is excluded from taxable income. Hawaii charges a general excise tax of 4 percent instead of sales tax. IDAHO If the individual is age 65 or older, or age 62 and disabled, Civil Service Retirement System and Foreign Service Retirement and Disability System pensions qualify for a deduction. Refer to Form 38 R for details. Federal Employ- ees Retirement System or Foreign Service Pension Sys- tem pensions do not qualify for this deduction. The deduction is reduced dollar for dollar by Social Security benefits. Social Security itself is not taxed. Idaho state sales tax is 6 percent; some local jurisdictions add as much as another 3 percent. ILLINOIS Illinois does not tax U.S. government pensions, TSP distributions or Social Secu-