For most people who (still) receive traditional pensions, the payments are fully taxable. But for some pensioners who made after-tax contributions to their pensions, part of their monthly payments are not taxable. This video show you when this can happen, and how to determine the non-taxable portion of your payments if you find yourself in this situation.
0:00 Introduction
0:45 When pensions can be partially non-taxable
3:03 What is the “Simplified Method?”
4:20 Simplified Method Calculations
6:00 Keeping track of Recovered Cost
6:47 Conclusion
To learn more about what’s on your 1099R Form, click here:
Resources and additional information:
IRS Publication 17: “Your Federal Income Tax”:
IRS Publication 554: “Tax Guide for Seniors”::
IRS Publication 575: “Pension and Annuity Income”:
IRS Form 1099-R “Retirement Distributions”:
The Balance: “Are Pensions and Annuities Taxable?”
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Intro Music: “Bluesy Vibes” – Doug Maxwell – YouTube Audio Library
Outro Music: “Modern Attempt” – Track Tribe via YouTube Audio Library
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.
The information in this video is current as of date of publication, and is subject to changes….(read more)
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As people near retirement age, they often begin to wonder about the tax implications of their pension income. Many individuals believe that once they start receiving their pension payments, they won’t have to pay any taxes on that money. However, the truth is that pension income is usually taxable, and understanding how it is taxed can help you plan for your retirement more effectively.
In most cases, pension income is considered taxable income by the Internal Revenue Service (IRS). This means that you will have to report your pension income on your annual tax return and pay taxes on it at your applicable federal and state income tax rates. The amount of tax you will owe on your pension income will depend on several factors, including the amount of your pension payments, your overall income level, and your filing status.
There are different types of pensions, and how they are taxed can vary. For example, if you have a pension plan funded entirely by your employer, your pension income will typically be fully taxable. On the other hand, if you have a pension plan that you contributed to with after-tax dollars, a portion of your pension income may be tax-free.
Individuals who receive pension income may also be subject to special tax rules that can affect how much they owe in taxes. For example, if you retire early and start taking pension payments before reaching the age of 59 1/2, you may be subject to an additional 10% early withdrawal penalty on top of regular income taxes. However, there are exceptions to this rule, such as if you retire early due to disability or separation from service.
It’s important to note that state income tax laws also play a role in how pension income is taxed. Some states do not tax pension income at all, while others tax it at varying rates. It’s essential to understand the tax laws in your state so that you can accurately plan for your tax liabilities in retirement.
To ensure that you are properly reporting and paying taxes on your pension income, it’s wise to consult with a tax professional or financial advisor. They can help you navigate the complexities of pension taxation and develop a tax strategy that aligns with your overall financial goals.
In conclusion, pension income is typically taxable, and understanding how it is taxed can help you plan for your retirement and avoid any surprises come tax time. By educating yourself on the tax implications of your pension income and seeking guidance from financial experts, you can make informed decisions about your retirement finances and enjoy a more financially secure future.
Thanks for the excellent video. I pay $6100/year in after tax money towards my pension. My company also adds money. I called my pension office at work, and asked how much of my contributions will be taxed. I was told to talk to a tax advisor. They didn't want to try answering my question. Bunch of dummies!
great video! Question. On the 1099-r, what is the difference between "employee contributions" and "total employee contributions"?
Fantastic presentation!
My mom, who is retired baby boomer, recieved a 1099-R through the mail and it was issused as a death benefit. My aunt passed away last year and she left some money to my mom. How can she report this to the IRS in order to get a refund?
This is the best! Thank you for your videos!!!!!