It depends on the source of your retirement income, your age, and whether you claim other exclusions.
New York allows government pension subtractions and a pension and annuity income exclusion that may reduce or eliminate tax on retirement income.
New York allows government pension subtractions and a pension and annuity income exclusion that may reduce or eliminate tax on retirement income.
Government Pensions – Fully Exempt
- Included:
- NY State/local government pensions
- Federal government pensions (including military)
- Certain public authorities (e.g., MTA Police, MABSTOA, LIRR)
- Report on: Line 26 of Form IT-201
- Not included:
- Private employer pensions
- Salary-reduction annuity plans
- IRC §457 deferred comp periodic distributions
Pension & Annuity Income Exclusion – Up to $20,000
- Who qualifies?
- Age 59½ or older before Jan 1, 2025
- Beneficiaries of a decedent who would have qualified
- Report on: Line 29 of Form IT-201
- Limit: $20,000 per person (married couples can each claim up to $20,000)
- Includes: IRA, 403(b), HR-10 (Keogh), 401(k), certain annuity contracts
- Excludes:
- Annuities purchased with your own funds
- Roth-designated employer contributions under SECURE 2.0
- QDRO/DRO distributions to nonemployee spouses
| Income Source | Taxable in NY? | Exemption/Exclusion |
|---|---|---|
| 🏛 NY State/local government pension | ❌ No | Full subtraction (Line 26) |
| US Federal government pension | ❌ No | Full subtraction (Line 26) |
| 🏢 Private employer pension | ✅ Yes | Up to $20,000 if age 59½+ (Line 29) |
| 💼 IRA distributions | ✅ Yes | Up to $20,000 if age 59½+ (Line 29) |
| 💳 Deferred comp (IRC §457) | ✅ Yes | May qualify under Line 29 |
| 💵 Social Security | ❌ No | Fully exempt |
| 👥 Beneficiary pension income | ✅ Yes | Limited to share of $20,000 exclusion |
| ♿ Disability income (Form IT-225) | ✅ Yes | Combined with pension exclusion cannot exceed $20,000 |
⚠ Additional Limitations
- Beneficiary Rule:
Your exclusion cannot exceed your share of the decedent’s $20,000 limit. - Disability Income Exclusion:
If also claiming Form IT-225, code S-124, the combined total of both exclusions cannot exceed $20,000. - Social Security: Fully exempt in NY.
Program Entry
To make this manual entry to exclude your retirement income, go to:
State Section → Edit New York Return → Subtractions from Income → Certain Pension Income Is Excluded From New York Taxable Income:
- Enter the Taxable Pensions received from New York State, Local, and Federal governments (Line 26)
- Enter other taxable pensions (not included above) received from the time you turned 59 1/2 to the end of the tax year. (Do not enter more than $20,000 per spouse.) (Line 29)