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.
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.
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. |
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 Kentucky. Social Security has its own rules in every state; see the full breakdown in how Kentucky taxes retirement income generally.
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.