Q&A: Tax Withholding on a FERS or CSRS Pension
Hi Stephen, I’m filling in my retirement paperwork and have a quick question about tax withholding:
- Federal withholding W-4P: Do you suggest I just have usual federal tax withheld under my “single” status?
- State withholding: should I elect to NOT have state income tax withheld from my annuity? If not, what do you suggest I use for either the number of allowances or the set dollar amount?
- Using the 5% ballpark, if your pension is going to be $40,000, 5% would be $2,000.
- You can divide the $2,000 by 12 = $167
- Many states exclude pension income from state taxation. See here for a state-by-state summary: https://www.narfe.
- Also, the above is just based on your pension income. Other income will be taxed as well.
- you’ll likely be in a lower tax bracket, and
- you will not have Social Security nor Medicare taxes withheld (you don’t pay Social Security tax nor Medicare tax on pension income).
I hope this helps!
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