Retirement income exempt
How Pennsylvania taxes retirement income
Pennsylvania’s flat 3.07% personal income tax leaves most retirement income alone. Social Security is not taxed. Pensions and other payments from eligible employer retirement plans are not taxed once you have met the plan’s retirement age or years of service.
IRA withdrawals are exempt as long as you would not owe the federal early-withdrawal penalty, which generally means after 59½, retirement, disability or death. Rollovers that are not taxed federally are not taxed by Pennsylvania either.
Early distributions from an eligible plan, taken before you meet its retirement conditions, are taxed to the extent they exceed the contributions you already paid tax on. Pennsylvania taxes your own pension contributions while you work, which is why those come back tax-free. Local earned income taxes apply to wages, not to pensions.
Pennsylvania public pensions
For the formula, payment dates and raises in your plan, see PSERS.
Questions
Does Pennsylvania tax PSERS or SERS pensions?
No, not once you have met the plan’s retirement age or service. Pensions from eligible plans in other states are treated the same way.
Are 401(k) and IRA withdrawals taxed in Pennsylvania?
Not after retirement or 59½, as long as no federal early-withdrawal penalty applies.
Does Pennsylvania tax Social Security?
No. Social Security benefits are not taxed.