Did you receive railroad retirement benefits?
Railroad retirement annuity payment consists of one or more of the following elements:
- Social Security Equivalent Benefit portion of tier I
- Non-Social Security Equivalent Benefit (NSSEB) portion of tier I
- Tier II benefit
- Vested dual benefits
- Supplemental annuity
Railroad retirement benefit payments can contain both SSEB and NSSEB portions, as such, you may receive two separate tax statements from the RRB following the end of each tax year. While most portions of your benefits are usually treated as private pensions for tax purposes, the SSEB portion of your tier I benefit is treated as if it came from Social Security.
If you received Form RRB-1099, Form RRB-1099-R or form RRB-1042S you must use the information it contains when calculating taxable income to complete your tax return.
Railroad benefits come from a different program than Social Security. However, as with Social Security, the amount of your SSEB that is taxable depends on your income. If your tier I SSEB payment is the only income you receive, those benefits are not taxable. In most other cases 50% or less of your SSEB is taxed, but up to 85% of your SSEB may be taxable in certain situations.
To determine how much of your SSEB is taxable, take half the amount you receive in SSEB payments during the year and add to it the full amount of your other income, including the other portions of your railroad retirement annuity payment and any additional types of income you receive.
If the total amount exceeds $25,000 ($32,000 for married taxpayers filing a joint return), half of your SSEB may be taxable. As this amount increases beyond $25,000 (or $32,000), the portion of your SSEB that is taxable also rises. If half your SSEB plus all other income equals $34,000 ($44,000 for married taxpayers filing jointly) or more, you will pay taxes on the maximum of 85% of your SSEB payment.
Exception: If you are married but filing a separate return from your spouse and you lived with your spouse at any time during the tax year, the amount of your income and SSEB is irrelevant; 85% of what you receive in SSEB is taxable no matter how much you received in benefits and other income.
For further information about tax treatment of SSEB payments, refer to IRS publication 915, Social Security and Equivalent Railroad Retirement Benefits.