Pension Income Tax Calculator 2026

How the federal government taxes your pension

Pension income is ordinary income for federal tax purposes. There's no preferential rate for it the way there is for qualified dividends or long-term capital gains. Every dollar of pension income stacks on top of your other income and is taxed at your marginal bracket.

The 2026 brackets for a single filer: 10% on the first $12,400 of taxable income, 12% up to $50,400, 22% up to $105,700, 24% up to $201,775, 32% up to $256,225, 35% up to $640,600, and 37% above that. The standard deduction for 2026 is $16,100 for single filers and $32,200 for married filing jointly. Single filers 65 or older add $2,050; married filers add $1,650 for each spouse 65 or older. On top of that, for 2025 through 2028, each person 65 or older gets a $6,000 senior deduction, which shrinks by 6% of income over $75,000 ($150,000 joint).

A single retiree age 65 with a $45,000 pension and no other income: taxable income is $45,000 minus the $18,150 standard deduction ($16,100 plus $2,050 for being 65) and the $6,000 senior deduction, or $20,850. The first $12,400 is taxed at 10% ($1,240) and the remaining $8,450 at 12% ($1,014), for $2,254 in federal tax. That's an effective rate of 5.0%, even though the last dollar is taxed at 12%.

Add Social Security income to the picture and it gets more complicated. Up to 85% of Social Security benefits become taxable once combined income (your other income plus half of your benefits) passes $34,000 for a single filer. A $45,000 pension plus $20,000 in Social Security gives combined income of $55,000, and $17,000 of the benefits (85%) becomes taxable. The calculator above runs that worksheet for you.

State taxes: the range is enormous

Nine states have no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in any of these, your state tax on pension income is zero, full stop.

Beyond those nine, the variation is wide. Illinois, Mississippi, and Pennsylvania exempt pensions from qualified plans despite having income taxes. Alabama exempts defined-benefit pensions, public or private. Iowa exempts retirement income for anyone 55 or older. New York exempts New York state and local pensions and federal pensions, and Massachusetts exempts its own state and local pensions and federal pensions. For a retiree living on the right kind of pension, these states tax it like the no-tax states do: not at all.

Then there's a long middle band. Kentucky excludes the first $31,110 of retirement income. Georgia excludes $35,000 per person at 62 to 64 and $65,000 at 65 or older, but nothing under 62 unless you're disabled. Colorado excludes $20,000 at 55 to 64 or $24,000 at 65 or older, less any Social Security you subtract. South Carolina deducts $3,000 under 65 and $15,000 at 65 or older. Michigan lets every retiree deduct up to $67,610 ($135,220 joint) for 2026.

At the other end: California taxes all pensions, CalPERS and CalSTRS included, at graduated rates up to 13.3%. Minnesota taxes private pensions at rates up to 9.85%. Oregon taxes PERS and private pensions at rates up to 9.9%. Vermont's top rate is 8.75%, and its pension exclusion covers only CSRS and other public pensions not covered by Social Security. Top rates apply only at high incomes. The calculator runs California's 2026 brackets, standard deduction and exemption credits, so a single retiree with a $48,000 CalPERS pension and $24,000 of Social Security pays about $710 a year to the state, not the $6,400 the top rate would suggest.

What the state choice is actually worth

The gap between a state that taxes your whole pension and one that exempts it is a few percent of the pension every year, and it repeats for every year of retirement. Run your own numbers above with your state and the one you're considering.

Pension type matters as much as the state. A Kansas KPERS pension is exempt in Kansas, but move to Arizona and it gets no subtraction at all, because Arizona's $2,500 covers only Arizona and federal pensions. A CalPERS pension is fully taxable in California and fully exempt in Hawaii, which doesn't tax government pensions from any state. Check how your new state treats a pension from your old one; the calculator's comparison list does this for you.

The decision to relocate in retirement is real and involves much more than taxes: proximity to family, healthcare access, property tax rates, cost of living, climate, and where you want to actually be. But the tax picture should be part of the analysis. Many retirees who move from high-tax states to Florida or Texas cite the tax savings as the deciding factor once the other variables are roughly equal.

Property and sales taxes complicate the comparison. States without an income tax still need revenue, and some lean harder on property taxes. Look up the property tax rate for the county you'd live in before counting the income tax savings.

Social Security and your pension: the interaction

If you receive Social Security benefits alongside your pension, the two interact in a specific way that most retirees don't anticipate. Social Security benefits become federally taxable once your "combined income" exceeds a threshold.

Combined income is defined as: adjusted gross income plus nontaxable interest plus half of your Social Security benefit. For single filers, up to 50% of benefits can be taxable once combined income exceeds $25,000, and up to 85% once it exceeds $34,000 ($32,000 and $44,000 joint). The thresholds aren't indexed for inflation, so more retirees cross them every year.

A single retiree with a $40,000 pension and $18,000 in Social Security benefits: combined income is $40,000 plus $9,000 (half of SS) = $49,000. That's well above the $34,000 threshold, so up to 85% of the SS benefit ($15,300) is taxable. The pension itself is fully taxable. Total federally taxable income before deductions: $55,300. The pension income pushed nearly all of the Social Security into taxable territory.

This interaction is one reason Roth conversions in the years between retirement and Social Security claiming can make sense. Lower income in those transition years keeps SS out of taxable territory once you claim. A CPA or retirement planner can model this specifically for your numbers.

Strategies that actually reduce pension taxes

The most effective federal tax strategy for pension income is timing other income sources to avoid bracket creep. Traditional IRA and 401(k) withdrawals on top of a pension push into higher brackets fast. If you can delay IRA withdrawals until required minimum distributions force them (73, or 75 if born in 1960 or later), your earlier retirement years may stay in the 12% or 22% bracket.

Roth conversions in low-income years work the same way in reverse. If you retire at 60 before Social Security begins, you may have a window of 2 to 7 years where your income is low enough that converting traditional IRA money to Roth at the 12% or 22% rate is cheaper than it will be once RMDs begin. The tax-free Roth withdrawals later reduce future taxable income permanently.

At the state level, the strategies are simpler: live in a low-tax state, or live in a state that specifically exempts your type of pension. Government pension retirees have an advantage in states like New York, Massachusetts, Kansas, and Louisiana, which exempt certain government pensions while taxing private ones. Most of those exemptions cover only that state's own pensions and federal pensions. Private sector retirees have fewer state-specific exemptions and are more likely to benefit from relocating to a no-tax state.