The Foreign Service Journal - January/February 2018

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2018 89 STATE INCOME TAXTREATMENT OF PENSIONS AND ANNUITIES AND STATE SALES TAXES The laws regarding taxation of Foreign Service annuities vary greatly from state to state. In addition to those states that have no income tax or no tax on personal income, several states do not tax income derived from pensions and annuities. For example, Idaho taxes Foreign Service annuities while exempting certain categories of Civil Service employees. Several web- sites provide more information on individual state taxes for retirees, but the Retirement Living Information Center at www. retirementliving.com/taxes-by-state is one of the more comprehensive and is recommended for further information. ALABAMA Social Security and U.S. government pensions are not taxable. The combined state, county and city general sales and use tax rates range from 7 percent to as much as 8.65 percent. ALASKA No personal income tax. Most municipalities levy sales and/or use taxes of between 2 and 7 percent and/or a property tax. If over 65, you may be able to claim an exemption. AR I ZONA Up to $2,500 of U.S. govern- ment pension income may be excluded for each tax- payer. There is also a $2,100 exemption for each taxpayer age 65 or over. Social Secu- rity is excluded from taxable income. Arizona state sales and use tax is 5.6 percent, with additions depending on the county and/or city. ARKANSAS The first $6,000 of income from any retirement plan or IRA is exempt (to a maximum of $6,000 overall). Social Security is excluded from taxable income. There is no estate or inheritance tax. State sales and use tax is 6.5 percent; city and county taxes may add another 5.5 percent. CAL I FORN I A Pensions and annuities are fully taxable. Social Security is excluded from taxable income. The sales and use tax rate varies from 7.5 per- cent (the statewide rate) to 11 percent in some areas. CA Publication 71 lists all rates statewide. COLORADO Up to $24,000 of pension or Social Security income can be excluded if the individual is age 65 or over. Up to $20,000 is exempt if age 55 to 64. State sales tax is 2.9 percent; local additions can increase it to as much as 9.9 percent. CONNECT I CUT Pensions and annuities are fully taxable for residents. Social Security is exempt if Federal Adjusted Gross Income is less than $50,000 for singles or $60,000 for joint filers. Statewide sales tax is 6.35 percent. No local additions. DELAWARE Government pension exclu- sions per person: $2,000 is exempt under age 60; $12,500 if age 60 or over. There is an additional stan- dard deduction of $2,500 if age 65 or over if you do not itemize. Social Security is excluded from taxable income. Delaware does not impose a sales tax. D I STR I CT OF COLUMB I A Pension or annuity exclusion of $3,000 is applicable if 62 years or older. Social Secu- rity is excluded from taxable income. Sales and use tax is 5.75 percent, with higher rates for some commodities (liquor, meals, etc.). F LOR I DA There is no personal income, inheritance, gift tax or tax on intangible property. The state sales and use tax is 6 percent. There are additional county sales taxes, which could make the combined rate as high as 9.5 percent. Property taxes are imposed by local jurisdictions. GEORG I A Up to $35,000 of retire- ment income may be excludable for those aged 62 or older or totally dis- abled. Up to $65,000 of retirement income may be excludable for taxpayers who are 65 or older. Social Security is excluded from taxable income. Sales tax is 4 percent statewide, with additions of up to 3 percent depending on jurisdiction. HAWA I I Pension and annuity distri- butions from a government pension plan are not taxed in Hawaii. Social Security is excluded from taxable income. Hawaii charges a general excise tax of 4 per- cent instead of sales tax. I DAHO If the individual is age 65 or older, or age 62 and disabled, Civil Service Retirement System and Foreign Service Retirement and Disability