If you are participating in a pension plan and you are drawing funds out of it, then it is likely that you will receive some type of pension tax relief.  As an American, you are expected and obligated to pay income tax on your earnings if you are employed, profits from your own businesses, state and company pensions and some benefits.  If you have a savings account or investments, you will pay tax on them as well.  Included are dividends from shares, rental property monies and bank interest.  However, there are situations that enable you to get some tax relief on your pension.