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Taxation of Occupational Disability Annuity
(Posted November 25, 2006)
Question 613: I retired from the railroad with occupational disability at the age of 58 with more than 30 years of service. When will (if at all) I be able to claim my retirement as Social Security for federal income tax purposes?
Answer: When you can begin to claim a portion of your disability annuity as "Social Security" for federal income tax purposes depends on when Social Security would have started to pay you benefits if your rail work had be credited under that program.
With an Occupational Disability from Railroad Retirement, your condition might be severe enough to qualify for a "Period of Disability" at Social Security. If so, a portion of your Tier 1 benefit would be considered as a Social Security Disability benefit for federal income tax purposes.
The Railroad Retirement Board automatically reviews all disability applications to see if the worker's condition meets the Social Security standards. You should receive a letter informing you of their decision.
If you do not qualify for a Period of Disability, then you must wait until the year you turn 62. At that time, a portion of your Tier 1 benefit will start to be counted as Social Security, and you should receive separate IRS 1099 forms in January of the following year. Your Railroad Retirement benefit will be divided into two parts for federal income tax purposes: Social Security Equivalent Benefit and Industry Pension benefit.
If you have any questions about a Period of Disability decision in your case, you should contact the Railroad Retirement Board.
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