AFSA NEWS 70 JANUARY-FEBRUARY 2024 | THE FOREIGN SERVICE JOURNAL Civil Service Retirement System and Foreign Service Retirement and Disability System pensions qualify for a deduction. Refer to Form 38 R for details. Federal Employees Retirement System or Foreign Service Pension System 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 Security. State sales tax is 6.25 percent. Local additions can raise sales tax to 11 percent in some jurisdictions. INDIANA Social Security is excluded from taxable income. All other retirement income is taxed at the flat 3.15 percent Indiana income tax rate. Sales tax and use tax is 7 percent. IOWA Social Security is fully exempt. Beginning in 2023, all retirement income is exempt for taxpayers 55 and older. Statewide sales tax is 7 percent. KANSAS U.S. government pensions are not taxed. There is an extra deduction of $850 if over 65. Other pensions are fully taxed along with income from a 401(k) or IRA. Social Security is exempt if Federal Adjusted Gross Income is under $75,000. State sales tax is 6.5 percent, with additions of up to 4.1 percent depending on jurisdiction. KENTUCKY Social Security and Roth IRA distributions are exempt. Government pension income is exempt if retired before Jan. 1, 1998. If retired after Dec. 31, 1997, pension/annuity income up to $31,110 remains excludable depending on date of retirement. Sales and use tax is 6 percent statewide, with no local sales or use taxes. LOUISIANA Social Security is excluded from taxable income. Federal retirement benefits are exempt from state income tax. There is an exemption of $6,000 of other annual retirement income received by any person age 65 or over. Married filing jointly may exclude $12,000. State sales tax is 4.45 percent with local additions up to a possible total of 7 percent. Use tax is 8 percent regardless of the purchaser’s location. MAINE Social Security is not taxed. For 2023, up to $30,000 of other retirement income from pensions, 401(k) plans, and IRAs is exempt, but taxpayers must subtract Social Security benefits. For those age 65 and over, there is an additional standard deduction of $1,600 (filing singly) or $2,600 (married filing jointly). Sales tax is 5.5 percent. MARYLAND Those over 65 or permanently disabled, or who have a totally disabled spouse, can exclude up to $34,300 income from a pension or 401(k). Also, all individuals 65 years or older are entitled to an extra $1,000 personal exemption in addition to the regular $3,200 personal exemption available to all taxpayers. See the worksheet and instructions in the Maryland Resident Tax Booklet. General sales tax is 6 percent. MASSACHUSETTS Federal pensions and Social Security are excluded from Massachusetts gross income. Each taxpayer over age 65 is allowed an additional $700 exemption on other income. Sales tax is 6.25 percent. MICHIGAN Social Security is excluded from taxable income. Federal and state/local government pensions may be partially exempt, based on the year you were born and the source of the pension. (a) If born before 1946, private pension or IRA benefits included in AGI are partially exempt; public pensions are exempt. (b) If born after 1946 and before 1952, the exemption for public and private pensions is limited to $20,000 for singles and $40,000 for married filers. (c) If born after 1952, there is no exemption until taxpayer reaches age 67. Taxpayers have two options when they turn 67: either deduct $20,000 from all income sources ($40,000 for joint filers) or claim personal exemptions and deduct Social Security, military, and railroad retirement income. Full details at: https://michigan.gov/ taxes/0,4676,7-238--459647- -,00.html. Michigan’s state sales tax rate is 6 percent. There are no city, local, or county sales taxes. MINNESOTA Social Security income is taxed by Minnesota to the same extent it is on your federal return, unless it is your only source of income. All federal pensions are taxable, but single taxpayers who are over 65 or disabled may exclude some income if Federal Adjusted Gross Income is under $33,700 and nontaxable Social Security is under $9,600. For a couple who are both over 65, the limits are $42,000 for Adjusted Gross Income and $12,000 for nontaxable Social Security. Statewide sales and use tax is 6.875 percent. A few cities and counties also add a sales tax, which can be as high as 8.375 percent. MISSISSIPPI Social Security, qualified retirement income from federal, state, and private retirement systems, and income from IRAs are exempt from Mississippi tax. There is an additional exemption of $1,500 on other income if over age 65. Statewide sales tax is 7 percent.
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