This exclusion is for each taxpayer and must be computed independently of your spouse who may be filing on the same return. A husband and wife must complete and claim their own exclusion, regardless of filing status. Joint filersthe separately computed pension exclusion amounts will be combined.

Retirees of previously exempt retirement systems of the federal government, Commonwealth of Kentucky, or any Kentucky local government must compute the amount of pension income attributable to service credit earned after December 31, 1997.

• Types of Income Subject to Exclusion All pension and retirement income paid under a written retirement plan is eligible for exclusion. This includes pensions, annuities, IRA accounts, 401(k) and similar deferred compensation plans, death benefits, and other similar accounts or plans. As a general rule, if the income is reported on the federal income tax return, Form 1040, line 15(b) or 16(b); Form 1040A, line 11(b) or 12(b); Form 4972; or is a disability retirement benefit or deferred compensation distribution reported on Form 1040, line 7, then it qualifies for the exclusion.
• Service Credit Number of months (years) used by your retirement system to determine retirement benefits.
• Purchased Service Credit Voluntary purchases of service credit as allowed by your retirement system (i.e., military service or prior service with the same or similar system).

  Note: Purchased time is credited based on the dates of service.

• Purchased Service Credit (Air-time) Certain retirement plans allow for the purchase of up to five years of service credit unrelated to prior work history. These purchases are commonly known as air-time. Air-time is not included in total service earned after December 31, 1997, regardless of when purchased.

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