Generally withdrawals from IRAs (individual retirement accounts) as well as other tax deffered retirement plans are in fact taxable by the federal government. You should also expect to pay state income taxes on these withdrawals. The only exceptions would be if you reside in one of the seven states that do not impose state income taxes. The following would be those seven states: Alaska, Florida, Nevada, South Dakota, Texas, Washington state and Wyoming.
Luckily that is not always the case. As reported by Market Watch of the Wall Street Journal “Some states don’t tax retirement-account withdrawals at all, and others exempt a portion from taxation, sometimes only for retirees above a certain age or with income below certain thresholds. It generally depends on the state you live in when you take the distributions, but it can get confusing.” Read the full story here.