Box 16 for 1099-R (state distribution for pension) does not show an amount. Does that mean it is not taxable on a state return?

[Viktor Y]

Hi,

I have a retired client who was a public safety employee in Arizona (he was a firefighter).  His 1099-R shows a taxable distribution in box 1 and 2 for fed taxes.  However, box 16 (state distribution) does not show an amount. Does that mean this pension/retirement income was not taxable at state level?  I just want to make sure his state return is filed properly.  

State tax was withheld in box 14.

Thanks in advance!

[PhoebeRoberts]

States are not great at preparing 1099s. 

You might start with the AZ forms instructions and commentary:

https://azdor.gov/individual-income-tax-filing-assistance/identifying-other-taxable-income
https://azdor.gov/forms/individual/form-140-arizona-resident-personal-income-tax-booklet

[rcooley25]

Serveral states do not tax retirement income. I do not know if Arizonia is one of them.

[George4Tacks]

Pensions are generally taxable in the state of residency. 

Don't forget that Firefighters are Public Safety Officers https://www.irs.gov/pub/irs-dft/p575--dft.pdf page 6

[rcooley25]

I must respectively disagree with you. Many states do not tax retirement income whether that retirement income comes from the state you live in or someplace else.

[sjrcpa]

But the exemption from tax is usually accomplished by a subtraction from income on the state return.

Most states start with federal income and adjust it up or down.

[pamdory]

You'll probably have to determine that for yourself.  Since retirement income follows residency, you'll need to apply the law for the client's state of residency.  And you'll have to determine if it qualifies as a disability retirement by asking your client some questions about their circumstances.

While there are several states that don't tax retirement income, there are many that do, and in different ways.  I wouldn't rely on the 1099-R issuer to know the answer.