Updated September 4, 2026. Quick answer: Partially, and the rule is the same across public, private and federal pensions: service earned before January 1, 1998 is fully exempt, and everything else (including IRA and 401(k) distributions) falls under a shared $31,110 exclusion. Military retirement pay is not fully exempt, contrary to a common assumption; it follows the same federal-pension rule.
State retirement-income forms, line by line: Kentucky Schedule M.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Kentucky tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Kentucky tax 403(b) and 457(b) withdrawals.
The state police system (SPRS), with its options and refund rules from its own documents: Kentucky SPRS retirement decisions.
The county employees’ system (CERS), with its options and refund rules from its own documents: Kentucky CERS retirement decisions.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Kentucky tax withholding on pension payments.
Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is Kentucky a community property state?.
Selling your home? How the state taxes the profit, from its own tax documents: Does Kentucky tax the profit from selling your home?.
The state’s income tax schedule: the Kentucky tax brackets for 2026.
Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Kentucky tax withholding on IRA and 401(k) withdrawals.
A pension earned in another state, or paid after a move, is covered here: does Kentucky tax out-of-state pensions.
Trusts have their own page: does Kentucky tax trust income.
Dividends and interest have their own page: does Kentucky tax dividends and interest.
Contributing to an HSA? How the state taxes it, from its own tax documents: Does Kentucky tax HSA contributions?.
Annuity payments have their own page: does Kentucky tax annuity income.
Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does Kentucky have an estate tax?.
Military retired pay has its own page: does Kentucky tax military retirement.
Selling stocks, funds or real estate has its own page: does Kentucky tax capital gains.
Withdrawals from a 401(k) or IRA have their own page: does Kentucky tax 401(k) and IRA withdrawals.
More on Kentucky: Does Kentucky Tax Social Security?, How Much Does a Living Trust Cost in Kentucky? and Is a Living Trust Worth It in Kentucky?
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 Kentucky taxes retirement income generally.
Pending, not current law: House Bill 183 (2026 session) would raise the exclusion to $41,110 starting tax year 2027; not yet enacted, so $31,110 remains current.
The rule in the source’s own words. Kentucky Revised Statutes, KRS 141.019(1)(g): “($31,110) of total distributions from pension plans, annuity contracts” (source, read October 5, 2026). This page’s governing citation: KRS 141.019(1)(g).
A worked example. Take $40,000 of distributions that the cap covers. For 2025 the cap is $31,110 (Schedule P), so $8,890 stays in Kentucky taxable income (Kentucky Department of Revenue, 2025 Schedule P).
How pensions and retirement-account withdrawals are taxed
| Public (state/local government) pensions | Partially exempt in two tiers: service before January 1, 1998 is fully exempt with no cap; service afterward falls under the general $31,110 exclusion shared with other retirement income. |
|---|---|
| Private (employer) pensions | Only the general $31,110 exclusion applies; the pre-1998 full exemption is limited to government pensions. |
| Federal government pensions (FERS/CSRS) | Same treatment as Kentucky state and local pensions: pre-1998 service fully exempt, the rest under the $31,110 cap. |
| Military retirement pay | Not fully exempt, contrary to a common assumption. Military retirement pay is treated as ordinary federal pension income under the same rule above (pre-1998 service exempt, rest capped at $31,110). Only active-duty pay is fully exempt. |
| IRA and 401(k)/403(b) distributions | Covered by the same $31,110 general exclusion as pensions, explicitly named on the state’s own worksheet. |
| General retirement-income exclusion | The $31,110 exclusion is itself the general cross-category exclusion, current for 2025 and 2026. No separate age-65 add-on could be confirmed on top of it. |
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Social Security is never taxed by Kentucky. Social Security has its own rules in every state; see the full breakdown in how Kentucky taxes retirement income generally.
Figures verified against KRS 141.019, the Kentucky Department of Revenue 2025 Schedule P and the Kentucky General Assembly record for 2026 House Bill 183 on September 30, 2026; the Social Security and age-65 add-on statements were not re-checked.
Statute and sources
Governing citation: KRS 141.019(1)(g) (pension exclusion), (1)(l) (active-duty military pay).
Read September 4, 2026.
Related: how Kentucky taxes retirement income generally · does Kentucky 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.