Updated October 16, 2026. Quick answer: New York lets people 59½ or older exclude up to $20,000 of qualifying pension and annuity income, and the IT-201 instructions list periodic distributions from governmental 457 plans and some 403(b) annuities as qualifying.
State retirement-income forms, line by line: New York IT-201 pension exclusion.
New York at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Yes, periodic distributions from a governmental 457 plan and certain 403(b) annuity contracts qualify |
| Do the state’s documents name these plans? | The documents read name both 403(b) and 457 plans |
| Retirement exclusion or credit | Pension and annuity income exclusion up to $20,000 per person, age 59½ or older |
| Public-employee pension rule | Government pensions are exempt by a separate subtraction; periodic 457 distributions are not eligible for it |
| Rate in the documents read | Progressive, 4% to 10.9% in the IT-201-I schedule |
| Changed for 2026? | The 2025 instructions read describe no 2026 change |
What the New York documents say
The IT-201-I instructions say “Qualifying pension and annuity income includes the following:” and list “periodic distributions from government (IRC § 457) deferred compensation plans”. They also list periodic distributions from a 403(b) annuity contract purchased by an employer for an employee, if the employer is a corporation, community chest, fund, foundation or public school. The exclusion is capped at $20,000 whatever the source, and only amounts received after age 59½ count.
The instructions say periodic 457 distributions are not eligible for the separate subtraction for New York State, local and federal government pensions, so the $20,000 exclusion is the route they describe for them.
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
- Only periodic distributions are listed for these plans; the documents do not say a lump-sum 403(b) or 457(b) payment qualifies.
- The exclusion does not apply to income from a New York State or local government or federal government pension plan, which has its own subtraction.
Common mistakes
- Assuming New York’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 New York taxes 401(k) and IRA withdrawals, New York retirement taxes, whether New York taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- Instructions for Form IT-201, Full-Year Resident Income Tax Return (Tax Year 2025): https://www.tax.ny.gov/pdf/current_forms/it/it201i.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.