We report an Fe Kβ x-ray emission spectroscopy study of local magnetic moments in the rare-earth doped iron pnictide Ca(1-x)RE(x)Fe(2)As(2) (RE = La, Pr, and Nd). In all samples studied the size of the Fe local moment is found to decrease significantly with temperature and goes from ∼ 0.9 μ(B) at T = 300 K to ∼ 0.45 μ(B) at T = 70 K. In the collapsed tetragonal phase of Nd- and Pr-doped samples (T<70 K) the local moment is quenched, while the moment remains unchanged for the La-doped sample, which does not show lattice collapse. Our results show that Ca(1-x)RE(x)Fe(2)As(2) (RE = Pr and Nd) exhibits a spin-state transition and provide direct evidence for a nonmagnetic Fe(2+) ion in the collapsed tetragonal phase; spin state as predicted by Yildirim. We argue that the gradual change of the spin state over a wide temperature range reveals the importance of multiorbital physics, in particular the competition between the crystal field split Fe 3d orbitals and the Hund's rule coupling.