What States Do Not Tax Railroad Retirement Benefits?

No state can tax Railroad Retirement Benefits. Federal law — 45 U.S.C. § 231m — prohibits every state, territory, and the District of Columbia from imposing income tax on any annuity paid under the Railroad Retirement Act, and that shield covers all 50 states.¹ The practical question for most retirees is not whether their state is allowed to tax the benefit (none are), but whether their state return is actually treating it that way.

The Federal Statute That Preempts Every State

Section 231m says that no annuity or supplemental annuity paid under the Railroad Retirement Act “shall be subject to any tax” under any law of any state, territory, or the District of Columbia. The only carve-out is for federal income tax under the Internal Revenue Code.¹

The exemption is broad. It covers every component of the benefit: Tier 1 (both the Social Security Equivalent Benefit portion and the Non-Social Security Equivalent Benefit portion), Tier 2, vested dual benefits, supplemental annuities, disability annuities, and survivor annuities.² It also reaches local income taxes. If your city or county levies its own income tax, your Railroad Retirement annuity is protected there too.¹

Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — impose no individual income tax, so the federal preemption is academic there. In the other 41 states, § 231m is the reason your benefit stays untaxed, and you may have to claim the exemption actively.

Where the Mistakes Happen

Errors on state returns almost always trace back to the Tier 1 SSEB portion. It looks like Social Security, it is taxed like Social Security at the federal level under Internal Revenue Code § 86, and it arrives on Form RRB-1099 rather than Form RRB-1099-R.³ State tax software sees that federal classification and sometimes carries it into the state return, applying whatever rule the state uses for Social Security.

That is a problem in the handful of states that still tax Social Security to some degree: as of 2026, Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. If you live in one of these states, watch for your SSEB amount getting swept into the Social Security worksheet. It does not belong there. Railroad Retirement Benefits are not Social Security for state tax purposes, and § 231m overrides any state rule that would otherwise pick them up.

The Tier 2 and NSSEB side has its own quirk. These amounts are reported on Form RRB-1099-R and taxed at the federal level like pension income under IRC § 72.⁴ A state return that starts from federal adjusted gross income will include these amounts unless you subtract them. If your state has a general pension exclusion, that may cover it. If not, you need the RRB-specific subtraction.

A few states make this easy by acknowledging the preemption directly. Massachusetts issued a formal directive confirming that neither Tier 1 nor Tier 2 Railroad Retirement Benefits are subject to its personal income tax.⁵ Illinois and Pennsylvania exclude pension and retirement income across the board, and Mississippi does the same for qualifying retirement distributions, so Railroad Retirement Benefits would be exempt in those states even without the federal statute.

Zeroing Out the Benefit on Your State Return

Most state returns start with federal adjusted gross income, which already contains the taxable portion of your Railroad Retirement Benefits. The exemption doesn’t apply itself. You have to subtract those amounts to get to the right state taxable income.

Pull the gross benefit amounts from both Form RRB-1099 (Tier 1 SSEB) and Form RRB-1099-R (Tier 2, NSSEB, vested dual benefits, and any supplemental annuity). Together they represent your full Railroad Retirement income.
Locate the subtraction line on your state return. Depending on the state, it will be labeled as an other-subtraction, a pension exclusion, or a state-specific income modification schedule. Enter the full gross amount there.
Check the state return summary before filing. The Railroad Retirement income showing as taxable on the state side should be zero. If any of it survived the subtraction, something went wrong.

Software will sometimes handle this automatically when you enter the RRB forms during the federal portion of the return, and sometimes it won’t. Verify rather than assume. If you use a paid preparer, cite 45 U.S.C. § 231m directly; the Railroad Retirement Board’s own tax guidance confirms the exemption, and a preparer who resists is simply unfamiliar with the statute.²

Fixing a Past Year That Got It Wrong

If a prior state return included Railroad Retirement Benefits as taxable income, you can amend it and recover the overpayment. Most states allow amended returns within three years of the original filing date or the date the tax was paid, whichever is later. The exact window varies, so confirm it with your state revenue department.

File the amended return with a short explanation citing 45 U.S.C. § 231m as the basis for the exemption, and attach copies of the RRB-1099 and RRB-1099-R forms for the year you are correcting. The dollars can add up. A retiree with a $40,000 combined Railroad Retirement annuity in a state with a 5% effective rate overpays by roughly $2,000 a year. Across three open years, that is $6,000 sitting with the state that should be yours.

Disability and Survivor Payments

The same protection applies to disability annuities and survivor annuities. Section 231m covers any “annuity or supplemental annuity” paid under the Act, which reaches the full range of payments the Railroad Retirement Board issues.² Federal tax treatment splits by component in the usual way — the SSEB portion follows Social Security rules, the rest follows pension rules — but the state exemption applies to the full amount without regard to that split.⁶

1
Office of the Law Revision Counsel. 45 USC 231m – Assignability; Exemption From Levy
2
RRB.Gov. The Taxation of Railroad Retirement Act Annuities
3
U.S. Railroad Retirement Board. Frequently Asked Questions
4
U.S. Railroad Retirement Board. Tier I and Tier II
5
Massachusetts Department of Revenue. Directive 93-1 – Tier I and Tier II Railroad Retirement Benefits
6
U.S. Railroad Retirement Board. TOM 100 Tax Computations