Do You Pay Federal Taxes on Pensions in Florida?

Yes, you pay federal taxes on pensions in Florida. The IRS treats pension distributions as ordinary income no matter which state you live in, and Florida’s lack of a state income tax has no effect on what you owe the federal government. What Florida spares you is the second layer of tax that retirees in most other states face on the same money.

How the Federal Government Taxes Your Pension

Distributions from a traditional defined benefit pension count as ordinary income on your federal return. If your employer funded the plan and you never paid tax on the contributions or the investment growth inside it, every dollar you receive in retirement is taxable.¹ Traditional 401(k)s and traditional IRAs follow the same logic because contributions went in pre-tax or were claimed as deductions.

Your plan administrator sends you Form 1099-R showing the year’s distributions. You carry those numbers to lines 5a and 5b of Form 1040. If the whole distribution is taxable, the total goes on 5b. If part is tax-free because you contributed after-tax money, the full amount goes on 5a and the taxable portion on 5b.²

Roth accounts are the exception. Qualified distributions from Roth 401(k)s and Roth IRAs are generally tax-free federally, provided you’ve held the account at least five years and are 59½ or older. That money doesn’t add to your taxable income in retirement.

What Florida Actually Changes

Florida’s constitution prohibits a tax on the income of individuals.³ Pension income, Social Security, IRA withdrawals, and every other form of retirement income escape state taxation entirely. A retiree collecting $50,000 a year in pension income in a state with a 5% income tax rate would owe roughly $2,500 to that state. In Florida, that money stays with you.

The federal bill is unaffected. The IRS applies identical rules to a Miami retiree and a Milwaukee retiree with the same pension.¹

Figuring Out How Much of the Pension Is Taxable

Not every pension payment is 100% taxable. If you contributed after-tax dollars during your working years, the IRS lets you recover that amount tax-free over time. The total of your after-tax contributions is your cost basis, sometimes called your investment in the contract, and it’s the number the calculation turns on.

The Simplified Method for Qualified Plans

Most retirees receiving payments from a qualified employer plan use the Simplified Method. You divide your cost basis by a number of expected monthly payments that the IRS sets based on your age when payments begin. The result is a fixed dollar amount subtracted from each monthly check as the tax-free portion; the rest is taxable.⁴

You calculate this once when payments start, and the tax-free amount stays the same each month. IRS Publication 575 includes Worksheet A for the calculation.⁵ Track how much of your basis you’ve recovered over the years. Once the full basis is recovered, every payment after that is entirely taxable.

The General Rule for Nonqualified Sources

If your pension comes from a commercial annuity or a nonqualified employer plan, you use the General Rule. It calculates an exclusion ratio by dividing your cost basis by the total expected return from the contract, and that ratio sets the tax-free percentage of each payment. IRS Publication 939 walks through it. The General Rule also applies to certain qualified plans with an annuity starting date before November 19, 1996, or where the retiree is 75 or older at the start date with payments guaranteed for at least five years.⁶

2026 Brackets and Deductions

Pension income is taxed at the same ordinary income rates as wages. For 2026, the federal brackets for single filers are:⁷

10% on income up to $12,400
12% from $12,401 to $50,400
22% from $50,401 to $105,700
24% from $105,701 to $256,225
32% from $256,226 to $403,550, with higher brackets above

For married couples filing jointly the thresholds roughly double: the 10% bracket runs to $24,800, and the 12% bracket covers $24,801 to $100,800.⁷

The 2026 standard deduction is $16,100 for single filers and $32,200 for joint filers. Taxpayers 65 or older get an additional $2,050 (single) or $1,650 per spouse (joint). The One, Big, Beautiful Bill Act added a new senior deduction of up to $6,000 per qualifying taxpayer, phasing out for income above $75,000 (single) or $150,000 (joint). For a married couple both over 65 with moderate income, the combined deductions can shelter more than $47,000 before any tax applies.

How Your Pension Affects Social Security Taxation

Social Security itself can be federally taxed, and pension income is often what pushes it into the taxable range. The IRS looks at your combined income: adjusted gross income, plus any tax-exempt interest, plus half of your Social Security benefits.⁸ The thresholds aren’t indexed for inflation, so they catch more retirees each year:

Single filers with combined income between $25,000 and $34,000 see up to 50% of benefits taxed; above $34,000, up to 85%.
Joint filers with combined income between $32,000 and $44,000 hit the 50% tier; above $44,000, up to 85%.⁹

A single retiree with a $30,000 pension and $24,000 in Social Security has a combined income of at least $42,000, well into the 85% tier. Florida residency doesn’t help here. These are purely federal thresholds.

Required Minimum Distributions

Money held in a traditional IRA, 401(k), or similar tax-deferred account has to start coming out at age 73. Defined benefit pensions typically satisfy RMD requirements automatically because they pay you a set amount each month, but any traditional IRA or old 401(k) sitting on the side needs its own calculation and withdrawal.¹⁰

Missing an RMD is expensive. The excise tax on the shortfall is 25% of the amount you failed to withdraw, dropping to 10% if you correct it within two years.¹⁰ You report the shortfall on Form 5329, and the IRS can waive the penalty if you show the error was reasonable and you’re fixing it.

Early Withdrawals Before 59½

Pulling money out of a retirement plan before age 59½ triggers a 10% additional tax on top of the regular income tax on the distribution.¹¹ Several exceptions matter for people close to retirement age:

Rule of 55. Leaving your job during or after the year you turn 55 lets you take distributions from that employer’s qualified plan without the 10% penalty. It applies to 401(k)s and similar workplace plans, not to IRAs. Public safety employees qualify at 50.
Total and permanent disability, which eliminates the penalty for both qualified plans and IRAs.
Substantially equal periodic payments taken over your life expectancy. Once you start, you generally can’t change the schedule for at least five years or until 59½, whichever is later.
Distributions to a terminally ill employee from a qualified plan.

The regular income tax still applies in each case. These exceptions only waive the extra 10%.

Withholding and Estimated Payments

Your pension plan withholds federal income tax from each payment unless you direct it otherwise. You set the amount by filing Form W-4P with the plan administrator. If you never submit one, the plan withholds as though you’re a single filer with no adjustments, which often overshoots for married retirees or those with significant deductions.¹²

The IRS expects taxes to arrive throughout the year, not in one April payment. If withholding falls short and you don’t cover the gap with estimated payments, an underpayment penalty follows. The IRS charges interest on underpayments at 7% annually as of early 2026.¹³ To stay clear, your total withholding and estimated payments for the year must equal at least 90% of the current-year tax or 100% of last year’s, whichever is smaller. If your prior-year AGI exceeded $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%.¹⁴ With a pension, Social Security, IRA withdrawals, and investment income all landing in the same year, adjusting Form W-4P or sending quarterly payments with Form 1040-ES is the simplest way to stay ahead of the math.

A Note on Military Retirement Pay

Regular military retirement pay based on years of service is fully taxable as ordinary income federally, the same as a civilian pension. The exception is disability-related pay. If your retirement stems from a combat-related injury, including injuries from armed conflict, extra-hazardous service, training exercises, or an instrument of war, that portion is excluded from federal taxable income. Veterans who would qualify for VA disability compensation can also exclude an equivalent amount from taxable military retirement even if they haven’t formally applied for VA benefits.¹⁵

1
Internal Revenue Service. 401k Resource Guide Plan Participants General Distribution Rules
2
Internal Revenue Service. Instructions 1040 (2025) – Section: Income
3
FindLaw. Florida Constitution Art. VII, Section 5
4
Internal Revenue Service. Publication 575 (2025), Pension and Annuity Income – Section: Partly Taxable Payments
5
Internal Revenue Service. Publication 575 (2025), Pension and Annuity Income
6
Internal Revenue Service. Publication 939, General Rule for Pensions and Annuities
7
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
8
Internal Revenue Service. Social Security Income
9
Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
10
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
11
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
12
IRS. 2026 Form W-4P – Withholding Certificate for Periodic Pension or Annuity Payments
13
Internal Revenue Service. Quarterly Interest Rates
14
IRS. 2026 Form 1040-ES (NR)
15
Army Benefits. Federal Taxes on Veterans Disability or Military Retirement Pensions