Railroad Retirement Bureau benefits seem confusing to the uninitiated.
Here’s a brief summary of how the taxation of these benefits works.
Tier I Benefits
Tier I RRB benefits are reported on Form RRB-1099. These benefits are considered the equivalent of Social Security benefits and are taxed exactly the same way. If you have both Tier I benefits and regular Social Security benefits, you combine the two amounts and report it all as Social Security income.
Follow the rules for taxation of Social Security benefits to determine how much, if any, of the benefits are taxable.
Tier II Benefits
Tier II benefits are reported on Form RRB-1099-R. These benefits are the equivalent pension distributions.
These benefits are reported on Line 16 of Form 1040.
A somewhat-difficult situation can arise if you have after-tax basis (shown in Box 4 of the RRB-1099-R). In that case, you follow the annuity rules for pensions for determining how much of the benefit is taxable.
More to Come
In future blog posts, I’ll go into more detail, with examples.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”