Updated October 30, 2026. Quick answer: No, for a CSRS annuity. The 2025 Form 40 booklet says “Amounts you received from the following retirement systems are not taxable”, and the list includes “United States Government Retirement Fund benefits” and the Civil Service Retirement System.
What Alabama does with a FERS or CSRS annuity
| Question | What the Alabama documents say |
|---|---|
| What the source says | Alabama lists Civil Service Retirement System benefits and United States Government Retirement Fund benefits among retirement income that is not taxable and should not be reported on the Alabama return. |
| Change for 2026 | No 2026 change is printed in the state documents cited here. |
In the Alabama documents’ own words
- “United States Civil Service Retirement System benefits” (Income Exempt from Alabama Income Taxation)
How this differs from other pensions in Alabama
The same list also exempts Alabama state and teacher retirement systems, military retirement pay and any defined benefit plan that qualifies under IRC 414(j), so federal civil service annuities are treated like other listed public pensions. The booklet tells filers to contact their plan administrator to learn whether a plan qualifies. See also Does Alabama tax pensions? and military retirement pay.
FERS, CSRS and your TSP
The state documents cited here do not address TSP withdrawals. For the Thrift Savings Plan itself, see state tax on TSP withdrawals and the TSP calculator.
Where this rule sits on the Alabama return
Alabama starts from federal adjusted gross income and then removes listed exempt retirement income, so the annuity that appears on your federal return is taken back out of Alabama taxable income.
Checks before you rely on this answer
- Find the listed system that pays you, because the exemption is written as a list of retirement systems.
- Confirm with your plan administrator if you are unsure whether a plan qualifies, as the booklet advises for other defined benefit plans.
- Keep reporting the annuity on your federal return as usual.
What the Alabama documents leave open
The two documents cited here name Civil Service Retirement System benefits and the United States Government Retirement Fund but do not use the word FERS, so how a FERS basic annuity is classed rests on the listed fund wording. The statute page returned no readable text, Alabama’s rates and TSP withdrawals were not addressed, and no 2026 booklet exists yet.
Common mistakes
- Assuming the exemption covers every federal payment. The booklet exempts the listed retirement systems, not all income from the government.
- Mixing up a pension with an IRA rollover. An annuity paid by a listed system is exempt; what you later take from an IRA is a different question.
Related: Does Alabama tax pensions?, Alabama military retirement pay, Alabama retirement deduction line by line, and FERS, TSP and Social Security sequencing.
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Answer againSources
- 2025 Alabama Form 40 Individual Income Tax Booklet: https://www.revenue.alabama.gov/wp-content/uploads/2026/01/25f40bk.pdf
- Income Exempt from Alabama Income Taxation: https://www.revenue.alabama.gov/individual-corporate/income-exempt-from-alabama-income-taxation/
Read from the state documents linked above on October 30, 2026. General information, not tax advice.