Ask The Experts: Retirement

By Reg Jones

CSRS survivor annuity withholding and taxes

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Q. I will be retiring in June and am trying to compute the number of federal tax exemptions, etc., that I take.  I looked through my notes from my last federal retirement planning class and saw that I jotted down that the amount withheld for survivor annuity from one’s monthly pension is a pretax item.  I thought it would be smart to obtain verification or validation rather than assume I heard and recorded this correctly.

If the survivor annuity withheld is subject to federal income tax at the time of withholding, then the portion withheld should be nontaxable when the survivor annuity gets paid out (sort of like the tax-free portion of one’s CSRS 7 percent contribution). Surely, CSRS pensioners and their survivors aren’t taxed twice on this income.

A. You’ll find out how your annuity and that of a survivor are treated in Internal Revenue Service Publication 721, Tax Guide for U.S. Civil Service Retiree Benefits, available at www.irs.gov/pub/irs-pub/p721.pdf.

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