Does West Virginia Tax Pension Income?
Understand how West Virginia's income tax applies to your pension. A state deduction for eligible retirees can significantly reduce your tax liability.
West Virginia imposes a state income tax, which prompts many current and future residents to question how this tax applies to their retirement funds. The state’s approach involves specific rules and deductions that can influence the tax liability of retirees. The tax treatment varies based on the type of retirement income and the age of the taxpayer.
West Virginia’s General Rule for Taxing Retirement Income
West Virginia’s tax code considers most forms of retirement income as taxable. This means that money received from sources like private company pensions, 401(k) plans, 403(b) plans, and traditional Individual Retirement Arrangements (IRAs) is included in your gross income for state tax purposes. These distributions are taxed at the state’s graduated income tax rates, which range from 2.22% to 4.82% depending on your total taxable income.
Certain public pensions receive a specific, though limited, exemption. An exclusion of up to $2,000 is available for income from the West Virginia Teachers’ Retirement System, the West Virginia Public Employees’ Retirement System, and most federal retirement systems. This particular subtraction is separate from the broader deduction available to older taxpayers. For most other retirement income, the full amount is subject to tax unless the taxpayer qualifies for the more substantial senior citizen deduction.
The Retirement Income Deduction
West Virginia provides a tax benefit for its older residents through a retirement income deduction. Taxpayers who are age 65 or older are eligible to deduct up to $8,000 of their retirement income from their state taxable income. This deduction is available per person, meaning a married couple where both spouses are 65 or older and have qualifying income could potentially deduct up to $16,000 on a joint return. This provision directly reduces the amount of income subject to state tax.
The treatment of retirement plan income should be distinguished from that of Social Security benefits. For the 2025 tax year, 65% of Social Security benefits are exempt from state income tax. A full 100% exemption is scheduled to take effect in 2026. Therefore, Social Security is treated differently from the age-restricted, dollar-limited deduction for other types of retirement income.
Claiming the Deduction
To claim the retirement income deduction, taxpayers report it as a modification that reduces their income on their West Virginia state tax return, Form IT-140. On the return, you will list your qualifying retirement income sources and apply the deduction, up to the $8,000 per-person limit for those age 65 and older. This directly lowers your West Virginia adjusted gross income, reducing your overall state tax liability.