Harness Money

The taxation of 401(k) income at the state level can vary depending on the state’s tax laws. While most states follow federal tax treatment for 401(k) contributions and earnings, there are some exceptions. Here are a few scenarios to consider:

1. States with No Income Tax: States such as Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not impose income tax, including on 401(k) income.

2. States with No Retirement Income Tax: Some states, such as Illinois, Mississippi, and Pennsylvania, do not tax retirement income, including distributions from 401(k) plans.

3. States with Tax Exemptions or Deductions: Several states offer exemptions or deductions for retirement income, which may include 401(k) distributions. Examples include Alabama, Hawaii, Iowa, Kansas, Louisiana, and Utah. The specific rules and limitations vary by state.

4. States that Fully Tax Retirement Income: Some states tax all forms of retirement income, including 401(k) distributions, without any special exemptions or deductions. This includes states like California, Connecticut, Nebraska, and Rhode Island.

It’s important to note that tax laws can change over time, and it’s always advisable to consult with a tax professional or refer to the specific tax regulations of your state for the most accurate and up-to-date information regarding the taxation of 401(k) income.