Yes. Federal income tax is withheld from most pension payments automatically, and many states withhold their own tax on top of that. Under federal law, a regular pension check is treated like a paycheck for withholding purposes: your plan administrator deducts federal tax from every payment unless you file the right form to change or stop it.1Office of the Law Revision Counsel. 26 USC 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income The rules shift depending on whether you take monthly checks, a one-time withdrawal, or a distribution you could roll over into another retirement account, and getting the choice wrong can leave you with a surprise bill or an underpayment penalty at tax time.
Withholding on Regular Pension Checks
If your payments arrive on a schedule — monthly, quarterly, or annually — for more than a year, the IRS calls them periodic payments, and your plan administrator withholds federal tax from each one the way an employer does from wages.2Internal Revenue Service. Publication 575 (2025), Pension and Annuity Income How much comes out depends on the filing status, dependents, and adjustments you report on Form W-4P.
Skipping the form does not skip withholding. If you never file a W-4P, the administrator treats you as a single filer with no dependents and no adjustments, which usually pulls out more than you actually owe.3Internal Revenue Service. Pensions and Annuity Withholding Filing the W-4P lets you enter your real filing status and deductions so the amount withheld tracks closer to your true liability.4Internal Revenue Service. About Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments The same form is how you ask for less withholding, more withholding, or none at all.5Internal Revenue Service. Topic No. 410, Pensions and Annuities
Withholding on One-Time and Lump-Sum Withdrawals
A payment that is not part of a regular schedule — say, a one-time partial withdrawal — is a non-periodic distribution. The default federal withholding is 10% of the taxable amount.6Internal Revenue Service. Form W-4R 2026 Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions You can raise it, lower it, or set it to zero by filing Form W-4R with your administrator before the money goes out. The form includes a marginal rate table to help you pick a percentage that fits your expected total income.
Choosing 0% means no federal tax is taken, but you still owe the full amount when you file. Underestimating what you owe can trigger a penalty, covered further down.
The Mandatory 20% on Rollover Distributions Paid to You
Some distributions could have been rolled over into an IRA or another qualified plan. If you take the money directly instead of rolling it, the administrator must withhold 20% of the taxable amount, and you cannot waive or reduce that.3Internal Revenue Service. Pensions and Annuity Withholding The rule covers most common plan types, including 401(k), 403(b), and governmental 457(b) plans.
A direct rollover avoids the 20% entirely. If the administrator sends the funds straight to the receiving IRA or plan, or writes the check payable to that account rather than to you, nothing has to be withheld.7Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The distinction matters even if you plan to redeposit the funds into an IRA within the 60-day rollover window: once the check is made out to you, 20% is gone, and you would have to make up that 20% from other savings to complete a full rollover and avoid tax on the withheld piece.
When You Cannot Opt Out
Two situations block an opt-out on periodic or non-periodic payments:
- Payments delivered outside the United States. If you are a U.S. citizen or resident alien and your pension is sent to an address outside the U.S. or its territories, you cannot elect out of withholding.3Internal Revenue Service. Pensions and Annuity Withholding
- Eligible rollover distributions, where the 20% is mandatory as described above.
Your opt-out also fails if you have not given the administrator a valid Taxpayer Identification Number, usually your Social Security number. Without one, backup withholding of 24% applies.8Internal Revenue Service. Tax Withholding Types
State Tax on Pension Payments
State rules vary widely. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no broad-based personal income tax, so pension payments from plans based in those states go out without state withholding. Washington taxes certain high-threshold capital gains, but that does not reach pension income.
Among the states that do tax income, treatment ranges from full taxation with mandatory withholding to partial or complete exemption. Several states offer a dollar-amount exclusion that shields part of your pension, often scaled by age or total income. Others exempt specific categories — government or military pensions, for instance — while taxing private pensions in full.
Some states tie their withholding election to your federal choice: opt out federally and the state waives too. Others require a separate state form. Your plan administrator or your state revenue agency can tell you which process applies.
How to File and Change Your Withholding
Send the completed W-4P or W-4R to your plan administrator, which is the organization that issues your payments. Many administrators run online portals where you can upload the form or set your preferences directly; paper by mail still works but takes longer.
A new election takes effect no later than the first payment made more than 30 days after the administrator gets the form.9Internal Revenue Service. Publication 505 (2025), Tax Withholding and Estimated Tax Some administrators apply changes sooner, but if you submit close to a payment date, expect one more check at the old rate. Check the next statement to confirm the update.
Your administrator has to send you at least one notice each year reminding you that you can change or revoke your election. That annual notice is a good prompt to reconsider your withholding if your income, deductions, or filing status shifted. The IRS also offers a free Tax Withholding Estimator that handles pension income and can generate a pre-filled W-4P from your entries.10Internal Revenue Service. Tax Withholding Estimator
If You Cut Withholding, Watch the Estimated Tax Rules
Reducing or eliminating pension withholding shifts the tax burden to you, and the IRS expects payment throughout the year rather than in one lump next April. You may owe a penalty if your combined withholding and estimated payments fall short of the smaller of two figures: 90% of your current-year tax, or 100% of the tax on your prior-year return.11IRS.gov. Form 1040-ES – Estimated Tax for Individuals (2026) If your prior-year adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%.
You generally do not need estimated payments if you expect to owe less than $1,000 after withholding and refundable credits. Otherwise, payments come due in four installments:
- April 15, 2026
- June 15, 2026
- September 15, 2026
- January 15, 2027
You can skip the January 15 payment if you file your 2026 return by February 1, 2027 and pay any remaining balance with it. Interest on underpayments is charged at a rate the IRS adjusts every quarter.12Internal Revenue Service. Quarterly Interest Rates
Many retirees find it simpler to raise their pension withholding than to track quarterly deadlines. Step 4(c) on Form W-4P lets you request an extra dollar amount from every check. Either route works with the IRS as long as enough total tax reaches Treasury during the year.