The Foreign Service Journal, February 2004

12 AFSA NEWS • FEBRUARY 2004 year on the basis of age or disability. The same income tax rates apply toannuities as other incomes. KANSAS : Full exemption;U.S. govern- ment pensions are not taxed. KENTUCKY : Government pensions attributabletoservicebeforeJan.1,1998,are not taxed. The portion of annuity income attributable to service afterDec. 31, 1997, is subject to tax at the appropriate rate, but is eligible for the pension exclusion of up to $39,400 in2003(up from$38,775 in2002). LOUISIANA : Up to$6,000exempt if 65 years or older and $12,000 exempt if both filers are annuitants over age 65. MAINE : Recipients of a government- sponsored pension or annuitymay deduct up to $6,000 on income that is included in their federal AGI, reduced by all Social Security and railroad benefits. MARYLAND : For individuals65yearsor older or permanently disabled, or if their spouse ispermanentlydisabled, all pensions may be excluded up to a maximum of $19,900undercertainconditions. Eligibility determination is required. Social Security is not taxed. See the worksheet and instructions toMaryland Form502. MASSACHUSETTS : Fullexemption;U.S. government contributorypensions arenot taxed. MICHIGAN : Federal government pen- sionsmaybededucted fromMichigan tax- able income to the extent included in fed- eral AGI. Retirement benefits fromprivate sourcesmaybededucted toamaximumof $37,110 for a single fileror $74,220 for joint filers for the 2003 tax year. Thismaximum is reduced by the deduction taken for the government pension. MINNESOTA : Certain people over 65 with incomes under $42,000 may be eligi- blefora“subtraction.” Themaximumsub- traction is $12,000 for married filing joint- ly and $6,000 for singles, which is reduced dollar for dollar by untaxed Social Security benefits, andbyonedollar for eachtwodol- lars of income over $18,000 formarried fil- ingjointlyand$14,500forsingles. Themar- riage credit alsoapplies toannuityandpen- sion recipients. MISSISSIPPI : Fullexemption;U.S.gov- ernment pensions and annuities are not taxed. MISSOURI : Up to$6,000 exempt if the pension income is less than $32,000 when married filing jointly, $16,000 ifmarried fil- ingseparately,or$25,000forasingleorhead- of-household filer. MONTANA : $3,600 pension income exclusion if federal adjustedgross income is less than $30,000. Pension income exclu- sion reduced for income levels above $30,000withno exclusion if federal adjust- ed gross income is greater than $31,800 for single taxpayer and $33,600 if married fil- ingajointreturnandbothspouseshavepen- sion income. NEBRASKA : Fully taxable. NEVADA : No personal income tax. NEWHAMPSHIRE : Nopersonalincome tax; federal pensions are not taxed. NEW JERSEY : Pensions and annuities from civilian government service are sub- ject tostate income taxwithexemptions for thosewhoareage62orolder, or totallyand permanentlydisabled. Singles andheadsof householdscanexcludeupto$13,125;mar- ried filing jointlyup to$17,500;married fil- ing separately up to $8,750 each. NEWMEXICO : All pensions and annu- itiesofNewMexicoresidents, if taxable fed- erally, are fully taxed as part of Federal Adjusted Gross Income. NEWYORK : Full exemption; U.S. gov- ernment pensions and annuities are not taxed. NORTH CAROLINA : Pursuant to the “Bailey” decision, government retirement benefits receivedby federal retireeswhohad 5yearsofcreditableserviceinafederalretire- ment systemonAug. 12, 1989, are exempt from North Carolina income tax. Those whodonothave fiveyearsof creditable ser- vice on Aug. 12, 1989, must pay North Carolina tax on their federal annuities. Up to $4,000 of any federal annuity income is exempt. NORTH DAKOTA : All pensions and annuities are fully taxed, except first $5,000, which is exempt less any Social Securitypayments, but only if the individual chooses to use Form ND-2 (optional method). Individuals are cautioned to check both FormND-1 and FormND-2 to ascertainwhichone yields the lowest tax for the year. Qualifying for the exclusion does notmean that FormND-2 is the bet- ter form to choose. OHIO : Taxpayers 65 andovermay take a $50 credit per return. In addition, Ohio givesataxcreditbasedontheamountofthe retirement income included in Ohio Adjusted Gross Income, reaching a maxi- mum of $200 for any retirement income over $8,000. OKLAHOMA : Up to $5,500 exempt on all federal pensions. OREGON : Generally, all retirement income is subject to Oregon tax when received by an Oregon resident. This includes non-Oregon source retirement income. However, federal retirees who retiredonorbeforeOct.1,1991,mayexempt alloftheirfederalpension;thosewhoworked bothbeforeandafterOct.1,1991,mustpro- rate their exemption using the instructions inthetaxbooklet. Oregon-sourceretirement income received by nonresidents who are not domiciled in Oregon is not subject to taxation by Oregon. PENNSYLVANIA : Governmentpensions andsocialsecurityarenotsubjecttopersonal income tax. PUERTO RICO : The first $8,000 of income received froma federal pensioncan be excluded for individualsunder 60. Over 60 the exclusion is $11,000. If the individ- ual receivesmore thanone federal pension, the exclusion applies to each pension or annuity separately. RHODE ISLAND : Fully taxable; no exemptions available. SOUTH CAROLINA : Individuals under age65canclaima$3,000deductionofqual- ifiedretirementincome;those65yearsofage or over can claim a $10,000 deduction of qualified retirement income. A resident of SouthCarolinawhois65yearsoroldermay claima $15,000deductionagainst any type of income, butmust reduce the $15,000by any retirement deduction claimed. SOUTHDAKOTA : No personal income tax. TENNESSEE : Socialsecurityandpension incomeisnotsubjecttopersonalincometax. TEXAS : No personal income tax. UTAH : Individualsunderage65maytake a $4,800 exemption. However, the deduc- tion is reduced$.50 for every $1.00 that the federal adjusted gross income exceeds $32,000 (married filing jointly) or $25,000 (single). Over 65 years of age a $7,500 exemption may be taken for each individ- ual. However,theexemptionisreduced$.50 for every $1.00 that federal adjusted gross incomeexceeds$32,000(marriedfilingjoint- ly) or $25,000 (single). VERMONT : Fully taxable. VIRGINIA : Individuals over age 65 can takea$12,000deduction;thoseage62to64, $6,000. All taxpayers receive an addition- al personal exemption of $800. WASHINGTON :Nopersonalincometax. WESTVIRGINIA : Upto$8,000ofincome receivedfromanysourceisexemptif65years or older. WISCONSIN : Pensionsandannuitiesare fully taxable. However, benefits received from a federal retirement system account establishedbeforeDec. 31, 1963, arenot tax- able. WYOMING :Nopersonal income tax. ▫