Updated September 4, 2026. Quick answer: Partially. Arizona exempts up to $2,500 of combined public pension and federal government pension income, but private pensions and IRA/401(k) distributions are fully taxable with no exclusion at all. Military retirement pay is fully exempt.
Confidence note: high. This page is scoped to pension, IRA and 401(k) taxation specifically. For the state’s full retirement-tax picture (Social Security, tax rates, estate and probate), see how Arizona taxes retirement income generally.
Pending, not current law: A 2025 bill (SB1371) proposing an age-67+ subtraction only reached committee passage (“AS PASSED BY COMMITTEE”) and was never enacted into law; do not treat it as current.
How pensions and retirement-account withdrawals are taxed
| Public (state/local government) pensions | Partially exempt: up to $2,500 total (combined with federal pensions below), no age or income test. |
|---|---|
| Private (employer) pensions | Fully taxable. The $2,500 subtraction’s enumerated list of 30 items names only government retirement systems, not private employer plans. |
| Federal government pensions (FERS/CSRS) | Partially exempt, sharing the same $2,500 combined cap as public pensions above. |
| Military retirement pay | Fully exempt (100%) for tax years beginning after December 31, 2020, phased up from $2,500 (through 2018) to $3,500 (2019 to 2020) to the full amount (2021 forward). |
| IRA and 401(k)/403(b) distributions | Fully taxable. No subtraction exists anywhere in the statute’s 30 enumerated exemption categories. |
| General retirement-income exclusion | None in current law. A 2025 bill (SB1371) that would have created an age-67+ subtraction only reached committee passage and was never enacted. |
Coordinate this with your overall retirement plan
An adviser can help weigh how much of a pension or IRA withdrawal to take this year, whether a Roth conversion makes sense before or after a move, and how state tax interacts with the rest of your plan, but that does not replace the numbers in your own return.
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Social Security
Social Security is never taxed by Arizona. Social Security has its own rules in every state; see the full breakdown in how Arizona taxes retirement income generally.
Statute and sources
Governing citation: A.R.S. sec. 43-1022, paragraphs 2 and 26.
Read September 4, 2026.
Related: how Arizona taxes retirement income generally · does Arizona tax Roth conversions? · Roth conversion taxes, all 51 jurisdictions.
General information drawn from each state’s own published statutes and revenue-department guidance, not legal, tax or financial advice. Figures and exemption amounts are current as of the date in the quick answer, are set by state law, and can change by future legislation; any pending bill named on this page is not yet law. This page cannot see your own return, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.