Do I have to pay tax on my pension?
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Q:

Do I have to pay tax on my pension?

A:

Quick Answer

The portion of a pension distribution that has not been previously taxed is subject to federal income tax. Any amounts that were contributed using after-tax money won't be taxable, but must be recovered over the period of distributions, not all at once, according to the Internal Revenue Service.

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Full Answer

Pension payments are fully taxable if the taxpayer did not pay anything for the pension. Funds that were tax-deferred, sometimes called pre-tax money, are not considered to be a taxpayer's payment. If the taxpayer contributed or paid for the pension, the IRS provides a calculation for determining how much of the amount received is taxable in Publication 575. There are only 12 states that do not tax pension income, according to U.S. News. The rest of the states consider pension income taxable.

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