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Stop, Look & Listen: Railroad Retirement Benefits Q&A

Answers are provided by Robert S. Kaufman

Determining the Taxable Portion of Railroad Retirement Benefits

(Posted September 24, 2011)

Question 835: Are Railroad Retirement benefits subject to Federal income tax? What about Iowa state income tax?

Answer: Federal income taxation of Railroad Retirement is complicated.

For tax purposes, your benefit is divided into two components: the Social Security Equivalent (most but not all of Tier 1), and Private Contributory Pension (the remainder of Tier 1, and all of Tier 2).
The Railroad Retirement Board (RRB) does the calculation of those two components, and issues an IRS Form 1099 to you in January showing them.

The Social Security Equivalent portion is taxed the same way Social Security benefits are taxed. Between 50% and 85% will be subject to Federal taxation, depending on the amount of your other taxable income.

With respect to the other portion, some of it will be taxable. The taxable part is determined under the "General Rule" prescribed by the IRS. You'll need to see instructions to the IRS Form 1040.

The RRB can withhold Federal income taxes on a portion of your benefits if you request them to.

I'm afraid I can't help much with respect to Iowa state income tax rules; you would need to ask an accountant in Iowa or check publications issued by the Iowa taxing authorities.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1997-2017 Robert S. Kaufman
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