Up until 2010, taxpayers under 62 could exclude up to $35,000 of retirement income from their taxable income. Retirement income is defined as income that you would earn from capital gains, pensions, annuities, etc. It’s income you earn from sources that are not subject to social security or Medicare taxes.
However, the current tax law for tax years 2012 and after, the exclusion is $65,000 for a taxpayer above the age of 65. For taxpayers between the ages of 62 and 65, the exemption is $35,000. The exemption is per person, so for married taxpayers, they would be able to exclude $130,000 if above the age of 65, and $70,000 for couples between the ages of 62 and 65.
As always, consult with your tax advisor or CPA for further details and how this could impact your situation.