Calculate the Tax-Free Amount of Your Retirement Benefit

Read further to see how to compute the tax-free portion of your annuity. You can also use our calculator.

The Internal Revenue Service has provided the following general information about the taxation of your monthly annuity payments. For more information, please contact the Internal Revenue Service.

If You Retired for Disability...

If you retired for disability, all of your disability annuity payments are fully taxable until you reach the age at which you would have first been eligible to retire based on your age and service. This is called the minimum retirement age. Generally, the combinations of minimum age and service for retirement are:

• age 55 and 30 years of service
• age 60 and 20 years of service
• age 62 and five years of service

As soon as you reach the age shown in the combinations above, for tax purposes, you would treat your annuity payments as shown below, as if you did not retire for disability.

If You Did Not Retire for Disability...

If you did not retire for disability and your annuity started after July 1, 1986, part of each payment is taxable and part is a tax-free return of the retirement contributions you made while you worked. Your total retirement contributions are shown on the original statement of your annuity. They are also shown on the form 1099R we send you each January to let you know the amount we paid you in the previous year to use in preparing your tax return. You must refigure the tax-free annuity portion if your retirement contributions are adjusted.

To figure the tax-free portion of your annuity, divide the amount of your retirement contributions by the appropriate factor from the charts below.

If your annuity began between July 2, 1986 and November 18, 1996, use chart number one to figure the the tax-free portion of your annuity.

Use chart two if your annuity started after November 18, 1996. Also use chart two if your annuity started on or after January 1, 1998 and it is not reduced to provide a benefit after your death for your husband or wife.

Use chart three if your annuity started on or after January 1, 1998 and it is reduced to provide a benefit for your husband or wife after your death. Chart three is based on your age at retirement, added to the age of your spouse whom we will pay after your death.

Example of Calculating the Tax-Free Portion of Your Monthly Annuity...

To figure the tax-free portion of your annuity, divide the amount of your retirement contributions by the appropriate factor. The answer you get is the tax-free part of each monthly payment from us.

If your retirement contributions were $25,000, your reduced annuity started after January 1, 1998, you were 57 when you retired, and your spouse was 55, the part of you annuity payment that is not taxable is $69.44 ($25,000 divided by 360 = $69.44). You would use chart three and divide by 360 because your combined ages of 57 and 55 equal 112.

After you have claimed a tax-free amount equal to your retirement contibutions, all of your retirement benefit is subject to tax. If you die before you claim all the tax-free amount, your survivor can claim the same tax-free amount until it equals your retirement contributions.

These guidelines are more fully explained in IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.

How to Start, Change, or Stop Your Monthly Federal Income Tax Withholding...

Use Services Online to change your Federal or State income tax withholdings or request a duplicate statement for tax filing purposes (1099R). You can also use our automated telephone system. You will need your claim number and Personal Identification Number (PIN).

Chart One: Retirements before November 19, 1996

• Age 55 and under - Divide by 300
• Age 56-60 - Divide by 260
• Age 61-65 - Divide by 240
• Age 66-70 - Divide by 170
• Age 71 and over - Divide by 120

Chart Two: Retirements from November 19, 1996 and Unreduced Retirements Starting January 1, 1998

• Age 55 and under - Divide by 360
• Age 56-60 - Divide by 310
• Age 61-65 - Divide by 260
• Age 66-70 - Divide by 210
• Age 71 and over - Divide by 160

Chart Three: Reduced Retirements Starting January 1, 1998 (Combined Ages)

• Ages Total Not More than 110 - Divide by 410
• Ages Total More than 110 - Divide by 360
• Ages Total More than 120 - Divide by 310
• Ages Total More than 130 - Divide by 260
• More than 140 - Divide by 210