Ask The Experts: Retirement

By Reg Jones

Tax-free annuity

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 Q. When I retire, I will have 36 years under CSRS. I have tried reading on the tax-free annuity part on the 1099-R. I will fall under the simplified method, and the chart for me shows a $310-a-month figure. I multiply this by 12 to get my tax-free annuity figure. What do I subtract this off of, and what will it do for me?

A. Under federal law, a portion of your annuity is tax free because your already paid taxes on the retirement deductions that were taken from your salary while you were working  For a better understanding of how the process works and what portion of your annuity will be tax free, go to www.irs.gov/pub/irs-pdf/p721.pdf and download a copy of the Internal Revenue Service’s Tax Guide to U.S. Civil Service Retirement Benefits.

Comments

  1. CSRS-Offset Retiree Says:
    January 10th, 2014 at 1:20 pm

    The 1099R that OPM issues shows two amounts: Gross Distribution and Taxable Amount (a smaller amount). Both are entered on the federal tax return but the smaller amount is used when adding up your total taxable income for the year.

  2. LabRat Says:
    January 30th, 2014 at 8:28 pm

    The amount you contributed is divided by the number from the IRS table for the estimated number of months life expectancy.

    If you retire at 55, the number is 360, 56 – 60 is 310 (not $310). Divide your contribution by that number and you have the monthly amount that is not taxable.

    If you die earlier, I am not sure your estate gets the remainder of your contributions back.