Senior Citizen Tax Benefits State Law Survey

Summary

This state law survey examines the taxation of senior citizens, particularly the retirement benefits that they receive. As a larger percentage of the population reaches retirement age, and as more taxpayers live primarily on a fixed income, both federal and state governments continue to evaluate the appropriate level of taxation of income received by retirees. The first area of difference in the tax treatment for federal and state tax purposes is that of inclusion in income. For federal income tax purposes, retirement income is generally includable in a taxpayer's income to the extent it does not represent a return of basis (that is, after-tax contributions). With defined benefit plans on the decline, basis-recovery issues are most commonly relevant to taxpayers who made after-tax contributions to contributory retirement plans, including certain state and local government plans, and to certain annuity arrangements.