Reuters: Illinois Budget Debate Raises Key Questions on Taxing Retirement Income

But the policies of various states are all over the map. Data provided by the Institute on Taxation and Economic Policy shows that 11 states tax some portion of Social Security benefits, usually mirroring the federal formula. Many others tax pensions and tax-deferred accounts, although some have exemptions that protect lower-income, public sector workers and military personnel.

Aside from Illinois, just two other states that levy income taxes exempt all retirement income: Mississippi and Pennsylvania. Read more