It depends on the source of your retirement income, your age, and whether you're eligible for one of New York's retirement income exclusions.
New York provides two important tax benefits for retirees:
- A full subtraction for certain government pensions
- A pension and annuity income exclusion of up to $20,000 per person
Depending on your situation, these benefits may reduce or completely eliminate New York tax on your retirement income.
Government Pensions That Are Fully Exempt
Some government retirement benefits are fully exempt from New York income tax.
Fully Exempt Pension Income
This generally includes:
- New York State government pensions
- Local government pensions
- Federal government pensions
- Military retirement pensions
- Certain public authority pensions, including:
- Metropolitan Transportation Authority (MTA) Police Retirement Program
- Manhattan and Bronx Surface Transit Operating Authority (MABSTOA)
- Long Island Rail Road (LIRR)
These amounts are generally reported as a subtraction on Line 26 of Form IT-201.
Not Eligible for the Government Pension Subtraction
The following generally do not qualify for the Line 26 subtraction:
- Private employer pensions
- Supplemental annuity plans funded through salary reduction arrangements
- Salary reduction retirement plans
- Many periodic distributions from IRC §457 deferred compensation plans
Pension and Annuity Income Exclusion
If your retirement income doesn't qualify for the full government pension subtraction, you may still qualify for New York's retirement income exclusion.
Who Qualifies?
You may qualify if:
- You were age 59½ or older before January 1 of the tax year, or
- You are the beneficiary of someone who would have qualified
Eligible income may be reported as a subtraction on Line 29 of Form IT-201.
Maximum Exclusion
- Up to $20,000 per taxpayer
- Married taxpayers may each claim up to $20,000 on their own qualifying retirement income
Unused exclusion amounts cannot be transferred between spouses.
Income That May Qualify
Examples include:
- Traditional IRA distributions
- 401(k) distributions
- 403(b) distributions
- HR-10 (Keogh) plan distributions
- Certain employer-sponsored annuity payments
- Certain periodic IRC §457 distributions
Income That Does Not Qualify
Generally excluded from the exclusion are:
- Annuities purchased entirely with your own funds
- Roth-designated employer contributions under SECURE 2.0
- Certain QDRO or DRO distributions received by nonemployee spouses
Quick Reference Guide
| Retirement Income Type | Taxable in New York? | Possible Exemption |
|---|---|---|
| New York State or local government pension | No | Full subtraction |
| Federal government pension | No | Full subtraction |
| Military pension | No | Full subtraction |
| Private employer pension | Yes | Up to $20,000 exclusion if eligible |
| Traditional IRA distributions | Yes | Up to $20,000 exclusion if eligible |
| 401(k) distributions | Yes | Up to $20,000 exclusion if eligible |
| Certain IRC §457 distributions | Yes | May qualify for exclusion |
| Social Security benefits | No | Fully exempt |
| Beneficiary pension income | Yes | Limited beneficiary exclusion rules apply |
| Disability income | Yes | Combined exclusions subject to limits |
Special Rules for Beneficiaries
If you receive retirement income as a beneficiary:
- You may qualify for an exclusion if the deceased individual would have qualified.
- Your exclusion may be limited to your share of the decedent's allowable exclusion amount.
- The combined exclusion available to all beneficiaries generally cannot exceed the decedent's allowable limit.
Disability Income Exclusion Limitation
If you're also claiming the disability income exclusion on Form IT-225 (Code S-124):
- The combined total of the disability income exclusion and pension/annuity exclusion generally cannot exceed $20,000.
What About Social Security Benefits?
Social Security benefits are fully exempt from New York income tax and are not included in New York taxable income.
How Do I Enter Retirement Income Exclusions in the Program?
To enter qualifying retirement income exclusions:
State Section → Edit New York Return → Subtractions from Income → Certain Pension Income Is Excluded From New York Taxable Income
Government Pensions (Line 26)
Enter taxable pensions received from:
- New York State government
- Local governments
- Federal government
- Military retirement plans
Other Pension Income (Line 29)
Enter other qualifying retirement income received after reaching age 59½, such as:
- IRA distributions
- Private pension distributions
- Qualified annuity income
Do not enter more than $20,000 per spouse.
Important Things to Remember
- Government pensions may qualify for a full subtraction.
- Other retirement income may qualify for a separate exclusion of up to $20,000.
- Married taxpayers can each claim their own exclusion if eligible.
- Social Security benefits remain fully exempt from New York tax.
- Disability income exclusions can reduce the amount available under the retirement income exclusion rules.
- The source of the retirement income determines which subtraction or exclusion applies.
Additional Information
Before entering retirement income on your New York return, review each Form 1099-R and determine whether the income came from a government pension, private pension, IRA, or another retirement plan. Properly categorizing retirement income can help ensure you receive every New York subtraction and exclusion you're entitled to claim.