Updated October 16, 2026. Quick answer: Arizona’s Form 140 booklet lets a taxpayer subtract up to $2,500 of pension income, but only from listed government systems (“subtract the amount you received or $2,500, whichever is less”); it does not name 403(b) or 457(b) plans, so these documents do not show a 403(b) or 457(b) withdrawal qualifying for that subtraction.
State retirement-income forms, line by line: Arizona Form 140 line 29a.
Arizona at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | The documents read do not say |
| Do the state’s documents name these plans? | The documents read name neither 403(b) nor 457(b) plans |
| Retirement exclusion or credit | Up to $2,500 per taxpayer, only for listed U.S. government and Arizona state or local government pensions |
| Public-employee pension rule | Yes, for the listed U.S. government and Arizona state or local government systems |
| Rate in the documents read | 2.5% for tax year 2025 |
| Changed for 2026? | The 2025 booklet describes no 2026 change to the pension subtraction; its notice says the legislature will address conformity to federal tax law changes during 2026 |
What the Arizona documents say
The Arizona Department of Revenue describes the subtraction on Line 29a of the 2025 Form 140 booklet, headed “Exclusion for U.S. Government, Arizona State or Local Government Pensions”. The booklet lists the qualifying public pensions, such as the United States Government Service Retirement and Disability Fund and the Arizona State Retirement System, and separates uniformed-services retired pay onto its own line.
The booklet prints a flat rate: “2025 New Tax Rate of 2.5% for All Income”. A withdrawal that is not a listed government pension is not described anywhere in the booklet as eligible for the $2,500 subtraction.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The booklet does not name 403(b) or 457(b) plans, so whether a distribution from an Arizona public employer’s 403(b) or 457(b) counts as one of the listed pensions is not stated.
- The Department’s 2026 booklet was not read, so any change for 2026 is not shown.
Common mistakes
- Assuming Arizona’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Arizona taxes 401(k) and IRA withdrawals, Arizona retirement taxes, whether Arizona taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for retirement income
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your withdrawals
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Arizona Form 140 Resident Personal Income Tax Booklet (2025): https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140Booklet.pdf
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.