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Pennsylvania taxes on pensions
Old 04-17-2014, 04:36 PM   #1
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Pennsylvania taxes on pensions

I received my retirement paperwork today for my pension benefit choices.
One section pertained to PA state taxes. I have a choice to choose having no taxes withheld on my monthly pension benefit or having 3.07% (PA state taxes) withheld.

Everything I have read about PA state taxes on Megacorp pension benefits is that PA does not collect state tax on pensions. If that is truly correct, why would my pension paperwork offer me the option of having the 3.07% withheld if no state taxes are collected?.

It seems like I would choose 0% withdraw. If I owe state tax I want to pay it upfront but it doesn't seem to me that I need to.

Any other Pensylvania retirees out there? I live in Chester county, East Pikeland township. I normally pay county and township taxes yearly. Will these two taxes also be exempt from paying or not.

Thanks in advance for any input.
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Old 04-17-2014, 04:54 PM   #2
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Perhaps this can help: State by State Guide to Taxes on Retirees
Pennsylvania does not tax Social Security benefits or any eligible Pennsylvania public or private pension plan.
Read more at State-by-State Guide to Taxes on Retirees - Pennsylvania -Kiplinger


Pennsylvania does not tax Social Security benefits or any eligible Pennsylvania public or private pension plan.
Read more at State-by-State Guide to Taxes on Retirees - Pennsylvania -Kiplinger
State-by-State Guide to Taxes on Retirees - Pennsylvania -Kiplinger

Pennsylvania does not tax Social Security benefits or any eligible Pennsylvania public or private pension plan.
Read more at State-by-State Guide to Taxes on Retirees - Pennsylvania -Kiplinger


Pennsylvania does not tax Social Security benefits or any eligible Pennsylvania public or private pension plan.
Read more at State-by-State Guide to Taxes on Retirees - Pennsylvania -Kiplinger
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Old 04-18-2014, 07:40 PM   #3
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Powerplay,


thanks for your response. I did see that link before. That's why I was surprised to find that 3.07% withdraw choice on my paperwork. At lunch I called an H&R Block office. They mentioned that if the distribution was not for a qualified retirement then taxes may be withdrawn for the state. This seem to answer my question on why the question was being asked. In my case it's a qualified distribution so I'll choose to have 0% taxes withheld.
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Old 04-19-2014, 11:23 AM   #4
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see PA-40 Instructions

INCOME NOT TAXABLE FOR PA PIT PURPOSES:
Social Security benefits and/or Railroad Retirement
benefits

Commonly recognized pension, old age, or retirement
benefits paid after becoming eligible to retire, and retiring

United Mine Workers Pension

Military pension benefits

Civil Service Annuity

Unemployment compensation and public assistance

Payments received under federal trade assistance, trade
adjustment allowances and alternative adjustment
assistance.

Payments received under workers' compensation acts,
occupational disease acts, or similar legislation; including
Heart and Lung Pension

Payments for injuries received while working, and
damages received, whether by suit or otherwise, for
personal injuries

Sick pay and disability benefits, including payments by
third party insurers for sickness or disability (does not
include amounts paid as sick leave)

NOTE:
If your employer includes your payments for
sickness, disability, and/or on-the-job injuries in Box 16
of your Form W-2, provide a statement from your
employer verifying the amount of these payments.

Employer-paid group term life insurance premiums

Damage awards and settlements from physical injury or
sickness such as pain and suffering or emotional distress

Child support

Alimony

Inheritances, death benefits, and income in respect of a
decedent (IRD) as defined for federal income tax purposes

Active-duty pay received as a member of the U.S. Armed
Forces from the U.S. government for service outside
Pennsylvania (see Page 37)

Awards and gifts made from detached or disinterested
generosity

Personal use of an employer’s owned or leased property
and/or services, at no cost or at a reduced cost

Federally taxable punitive damages received for personal
physical injury or physical sickness, whether received by
suit or by settlement

Income from contracts of insurance for long-term care

that do not have accumulated refundable reserves
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Old 04-19-2014, 02:14 PM   #5
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PA can tax IRA and Pensions if they are early distributions or are distributions from Annuities. Normal distributions are not taxable.
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Old 04-19-2014, 03:16 PM   #6
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Also, since PA doesn't give you a deduction for contributions to retirement accounts, you have basis and the first money you take out is your contributions which are treated as non taxable.
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Old 04-19-2014, 05:26 PM   #7
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Quote:
Originally Posted by engr View Post

Any other Pensylvania retirees out there? I live in Chester county, East Pikeland township. I normally pay county and township taxes yearly. Will these two taxes also be exempt from paying or not.

Thanks in advance for any input.

The local taxes in Chester County are for earned income only, so the pension is not taxable either. Say goodbye to Berkheimer!
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