Does Alabama tax pensions and retirement income?
Taxed, with a retirement exclusion
Partly. Alabama exempts payments from qualifying defined benefit pension plans, and people 65 or older can exclude up to $6,000 of other taxable retirement income, such as IRA or 401(k) withdrawals.
In the state's own words
Copied word for word from the official documents linked below each quote:
“Payments from a Defined Benefit Retirement Plan in accordance with IRC 414(j)”
“If you select Yes, the primary taxpayer is eligible for an exclusion of retirement income up to $6,000, not to exceed the amount taxable to Alabama on Line 9.”
Details worth knowing
- The $6,000 exclusion is for a taxpayer who is 65 or older, and a spouse who is 65 or older can claim it too on a joint return.
And Social Security?
No. Alabama lists federal Social Security benefits as income that is exempt from Alabama income tax. The Alabama Social Security page quotes the rule.
Federal tax still applies
Whatever Alabama does, pensions, annuities and traditional IRA or 401(k) withdrawals are generally taxable on your federal return. See the federal tax brackets and, if you are 73 or older, the required minimum distribution calculator.
State rules change, and the details (age limits, income limits, which plans qualify) matter. Check with the Alabama Department of Revenue before you file or move.
Other states in the same group
Check our work
The answer above comes from these documents. Follow the link and compare.
- Income Exempt from Alabama Income TaxationAlabama Department of Revenue. Read on November 12, 2026.
- Schedule RS (Retirement Income) instructionsAlabama Department of Revenue. Read on November 12, 2026.