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07. What is the Pension Benefits Income Deduction?

For tax years beginning on or after January 1, 2000 each recipient of certain pension benefits may deduct up to $6,000.00 of pension income that is included in federal adjusted gross income. For tax year 2000, the $6,000.00 cap must be reduced by all taxable and nontaxable social security or railroad retirement benefits received. Deductible pension income includes state, federal and military pension benefits as well as retirement benefits received from plans established and maintained by an employer for the benefit of its employees such as: qualified pension plans, including qualified SIMPLE plans; employee annuities; and eligible deferred compensation plans from state and local government or tax exempt organizations.

For tax years 2001 or later, military pensions are fully deductible up to $6,000.00 per recipient, and do not have to be reduced by social security or railroad retirement benefits received.

Married taxpayers who elect to file a joint return may have a total deduction of up to $12,000.00.

You must complete the Worksheet for Pension Income Deduction found in your income tax booklet, and submit the worksheet with your income tax return to claim a Pension Income Deduction.

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