Federal Tax Guide for Seniors

Tax Guide for Seniors
2023 Publication 554
Department of the Treasury
Internal Revenue Service

Contents
What's New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Publication 554

Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Cat. No. 15102R

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Tax Guide
for Seniors

Chapter 1. 2023 Filing Requirements . . . . . . . . . . 5
General Requirements . . . . . . . . . . . . . . . . . . . . 5

For use in preparing

2023 Returns

Chapter 2. Taxable and Nontaxable Income
Compensation for Services . . . . . . . . . . . .
Retirement Plan Distributions . . . . . . . . . . .
Social Security and Equivalent Railroad
Retirement Benefits . . . . . . . . . . . . . . .
Sickness and Injury Benefits . . . . . . . . . . .
Life Insurance Proceeds . . . . . . . . . . . . . .
Sale of Home . . . . . . . . . . . . . . . . . . . . . .
Reverse Mortgages . . . . . . . . . . . . . . . . .
Other Items . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 3. Adjustments to Income . . . . . . . . . . . 19
Individual Retirement Arrangement (IRA)
Contributions and Deductions . . . . . . . . . . . . 19
Chapter 4. Deductions . . . . . . . . . . . . . . . . . . . . 20
Standard Deduction . . . . . . . . . . . . . . . . . . . . . 20
Itemized Deductions . . . . . . . . . . . . . . . . . . . . . 21
Chapter 5. Credits . . . . . . . . . . . . . .
Credit for the Elderly or the Disabled
Child and Dependent Care Credit .
Earned Income Credit (EIC) . . . . . .

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Chapter 6. Estimated Tax . . . . . . . . . . . . . . . . . . 32
Who Must Make Estimated Tax Payments . . . . . . 32
Chapter 7. How To Get Tax Help . . . . . . . . . . . . . 32
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Future Developments
For the latest information about developments related to
Pub. 554, such as legislation enacted after it was
published, go to IRS.gov/Pub554.

What's New
Coronavirus-related distributions. The repayment period for a coronavirus-related distribution made on or after
January 1, 2020, and before December 31, 2020, ended
on December 31, 2023. If you made repayments in 2023
and/or you didn’t completely repay the distribution by December 31, 2023, see Form 8915-F.
Get forms and other information faster and easier at:
• IRS.gov (English)
• IRS.gov/Spanish (Español)
• IRS.gov/Chinese (中文)
Jan 18, 2024

• IRS.gov/Korean (한국어)
• IRS.gov/Russian (Pусский)
• IRS.gov/Vietnamese (Tiếng Việt)

Increase in required minimum distribution age. If you
reach age 72 in 2023 or later and have funds in a traditional IRA (including a SEP and SIMPLE IRA) the required
beginning date for your first required minimum distribution

is April 1 of the year following the year in which you turn
73.
Exception to the 10% additional tax for early distributions. The exception to the 10% additional tax for early
distributions include the following.

• Distributions from a retirement plan in connection with
federally declared disasters.

• Distributions from a retirement plan made to someone
who is terminally ill.

• Distributions to certain firefighters who meet the age
or years of service requirement.

See Form 5329 and Pub 590-B for more information.
Standard deduction amount increased. For 2023, the
standard deduction amount has been increased for all filers. The amounts are:

• Single or Married filing separately—$13,850.
• Married filing jointly or Qualifying surviving
spouse—$27,700.

• Head of household—$20,800.
Alternative minimum tax exemption increased. The
AMT exemption amount has increased to $81,300
($126,500 if married filing jointly or qualifying surviving
spouse; $63,250 if married filing separately).
Earned income credit. The maximum amount of income
you can earn and still get the credit has changed. You may
be able to take the credit if you earn less than:

• $17,640 ($24,210 if married filing jointly), don't have a
qualifying child, and are at least 25 years old and under age 65;

• $46,560 ($53,120 if married filing jointly), and you
have one qualifying child;

• $52,918 ($59,478 if married filing jointly), and you
have two qualifying children; or

• $56,838 ($63,398 if married filing jointly), and you
have three or more qualifying children.

For more information, see Earned Income Credit, later.
Standard mileage rate. For 2023, the standard mileage
rate allowed for operating expenses for a car when you
use it for medical reasons is 22 cents a mile.

Reminders
Qualified disaster tax relief. Special rules provide for
tax-favored withdrawals and repayments from certain retirement plans for taxpayers who suffered economic loss
as a result of a qualified disaster. See Form 8915-F, Qualified Disaster Retirement Plan Distributions and Repayments, for more information.
Maximum age for traditional IRA contributions. The
age restriction for contributions to a traditional IRA has
been eliminated.
Form 1040-SR. Form 1040-SR, U.S. Tax Return for Seniors, was introduced in 2019. You can use this form if you
2

are age 65 or older at the end of 2023. The form generally
mirrors Form 1040. However, the Form 1040-SR has
larger text and some helpful tips for older taxpayers. See
the Instructions for Form 1040 for more information.
Tax return preparers. Choose your preparer carefully. If
you pay someone to prepare your return, the preparer is
required, under the law, to sign the return and fill in the
other blanks in the Paid Preparer Use Only area of your return. Remember, however, that you are still responsible for
the accuracy of every item entered on your return. If there
is any underpayment, you are responsible for paying it,
plus any interest and penalty that may be due.
Third party designee. You can check the “Yes” box in
the Third Party Designee area of your return to authorize
the IRS to discuss your return with your preparer, a friend,
a family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the
processing of your return. It also allows your designee to
perform certain actions. See your income tax return instructions for details.
Employment tax withholding. Your wages are subject
to withholding for income tax, social security tax, and
Medicare tax even if you are receiving social security benefits.
Social security benefits information. Social security
beneficiaries may quickly and easily obtain various information from the Social Security Administration’s (SSA’s)
website with a my Social Security account, including getting a replacement SSA-1099 or SSA-1042S. For more information, go to SSA.gov/myaccount. See Obtaining social security information, later.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for
Missing & Exploited Children® (NCMEC). Photographs of
missing children selected by the Center may appear in
this publication on pages that would otherwise be blank.
You can help bring these children home by looking at the
photographs and calling 800-THE-LOST (800-843-5678)
if you recognize a child.

Introduction
The purpose of this publication is to provide a general
overview of selected topics that are of interest to older taxpayers. This publication will help you determine if you
need to file a return and, if so, what items to report on your
return. Each topic is discussed only briefly, so you will find
references to other free IRS publications that provide
more detail on these topics if you need it.
Table I has a list of questions you may have about filing
your federal tax return. To the right of each question is the
location of the answer in this publication. Also, at the back
of this publication, there is an index to help you search for
the topic you need.
While most federal income tax laws apply equally to all
taxpayers, regardless of age, there are some provisions
Publication 554 (2023)

that give special treatment to older taxpayers. The following are some examples.

• Higher gross income threshold for filing. You must
be age 65 or older at the end of the year to get this
benefit. You are considered age 65 on the day before
your 65th birthday. Therefore, you are considered age
65 at the end of the year if your 65th birthday is on or
before January 1 of the following year.

• Higher standard deduction. If you don't itemize de-

ductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year.
You are considered age 65 at the end of the year if
your 65th birthday is on or before January 1 of the following year.

• Credit for the elderly or the disabled. If you qualify,
you may benefit from the credit for the elderly or the
disabled. To determine if you qualify and how to figure
this credit, see Credit for the Elderly or the Disabled,
later.

Return preparation assistance. The IRS wants to make
it easier for you to file your federal tax return. You may find
it helpful to visit a Volunteer Income Tax Assistance
(VITA), Tax Counseling for the Elderly (TCE), or American
Association of Retired Persons (AARP) Tax-Aide site near
you.
Volunteer Income Tax Assistance and Tax Counseling for the Elderly. These programs provide free help
for low-income taxpayers and taxpayers age 60 or older to
prepare and file their returns. For the VITA/TCE site nearest you, contact your local IRS office. For more information, see Preparing and filing your tax return. under How
To Get Tax Help.
AARP Tax-Aide. AARP Foundation Tax-Aide offers
free tax preparation and has more than 5,000 locations in

Publication 554 (2023)

neighborhood libraries, malls, banks, community centers,
and senior centers annually during the filing season. Visit
AARP.org/TaxAide
or
call
888-OUR-AARP
(888-687-2277) for more information.
Comments and suggestions. We welcome your comments about this publication and suggestions for future
editions.
You can send us comments through IRS.gov/
FormComments. Or, you can write to the Internal Revenue
Service, Tax Forms and Publications, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224.
Although we can’t respond individually to each comment received, we do appreciate your feedback and will
consider your comments and suggestions as we revise
our tax forms, instructions, and publications. Don’t send
tax questions, tax returns, or payments to the above address.
Getting answers to your tax questions. If you have
a tax question not answered by this publication or the How
To Get Tax Help section at the end of this publication, go
to the IRS Interactive Tax Assistant page at IRS.gov/
Help/ITA where you can find topics by using the search
feature or viewing the categories listed.
Getting tax forms, instructions, and publications.
Go to IRS.gov/Forms to download current and prior-year
forms, instructions, and publications.
Ordering tax forms, instructions, and publications.
Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order
prior-year forms and instructions. The IRS will process
your order for forms and publications as soon as possible.
Don’t resubmit requests you’ve already sent us. You can
get forms and publications faster online.

3

Table I. What You Should Know About Federal Taxes
Note. The following is a list of questions you may have about filling out your federal income tax return.
To the right of each question is the location of the answer in this publication.
What I Should Know

Where To Find the Answer

Do I need to file a return?

See chapter 1.

Is my income taxable or nontaxable?
If it is nontaxable, must I still report it?
How do I report benefits I received from the Social
Security Administration or the Railroad Retirement Board?
Are these benefits taxable?
Must I report the sale of my home?
If I had a gain, is any part of it taxable?

See chapter 2.

See Social Security and Equivalent Railroad Retirement
Benefits in chapter 2.

See Sale of Home in chapter 2.

What are some of the items that I can deduct to reduce my
income?

See chapters 3 and 4.

How do I report the amounts I set aside for my IRA?

See Individual Retirement Arrangement Contributions
and Deductions in chapter 3.

Would it be better for me to claim the standard deduction
or itemize my deductions?

See chapter 4.

What are some of the credits I can claim to reduce my tax?

See chapter 5 for discussions on the credit for the elderly
or the disabled, the child and dependent care credit, and
the earned income credit.

Must I make estimated tax payments?

See chapter 6.

How do I contact the IRS or get more information?

See chapter 7.

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Publication 554 (2023)

1.
2023 Filing Requirements
If income tax was withheld from your pay, or if you qualify
for a refundable credit (such as the earned income credit,
the additional child tax credit, or the American opportunity
credit), you should file a return to get a refund even if you
aren't otherwise required to file a return.
Don't file a federal income tax return if you don't

TIP meet the filing requirements and aren't due a re-

fund. If you need assistance to determine if you
need to file a federal income tax return for 2023, go to
IRS.gov/ITA and use the Interactive Tax Assistant (ITA).

General Requirements
If you are a U.S. citizen or resident alien, you must file a
return if your gross income for the year was at least the
amount shown on the appropriate line in Table 1-1. For

other filing requirements, see your tax return instructions
or Pub. 501. If you were a nonresident alien at any time
during the year, the filing requirements that apply to you
may be different from those that apply to U.S. citizens.
See Pub. 519.
Gross income. Gross income is all income you receive
in the form of money, goods, property, and services that
isn't exempt from tax. If you are married and live with your
spouse in a community property state, half of any income
defined by state law as community income may be considered yours. States with community property laws include
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A registered domestic partner in Nevada, Washington, or California must
generally report half the combined community income of
the individual and their domestic partner. For more information about community property, see Pub. 555.
For more information on what to include in gross income, see chapter 2.
Self-employed persons. If you are self-employed in a
business that provides services (where the production,
purchase, or sale of merchandise isn't an income-producing factor), gross income from that business is the gross
receipts. If you are self-employed in a business involving

Table 1-1. 2023 Filing Requirements Chart for Most Taxpayers
Note. You must file a return if your gross income was at least the amount shown in the last column.
AND at the end of 2023
you were . . .*

THEN file a return if your gross
income** was at least. . .

single

under 65

$13,850

65 or older

$15,700

under 65

$20,800

65 or older

$22,650

under 65 (both spouses)

$27,700

65 or older (one spouse)

$29,200

65 or older (both spouses)

$30,700

.

IF your filing status is. . .

head of household
married filing jointly***

married filing separately

any age

qualifying surviving spouse

under 65

$27,700

65 or older

$29,200

*

**

***

$5

If you were born before January 2, 1959, you are considered to be age 65 or older at the end of 2023. (If your spouse died
in 2023 or if you are preparing a return for someone who died in 2023, see Pub. 501.)
Gross income means all income you receive in the form of money, goods, property, and services that isn't exempt from
tax, including any income from sources outside the United States or from the sale of your main home (even if you can
exclude part or all of it). It also includes gains, but not losses, reported on Form 8949 or Schedule D. Gross income from a
business means, for example, the amount on Schedule C, line 7, or Schedule F, line 9. But, in figuring gross income, don't
reduce your income by any losses, including any loss on Schedule C, line 7, or Schedule F, line 9. Don't include any
social security benefits unless (a) you are married filing separately and you lived with your spouse at any time in 2023, or
(b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than
$25,000 ($32,000* if married filing jointly). If (a) or (b) applies, see the Instructions for Form 1040 or Pub. 915 to figure the
taxable part of social security benefits you must include in gross income.
If you didn't live with your spouse at the end of 2023 (or on the date your spouse died) and your gross income was at least
$5, you must file a return regardless of your age.

Publication 554 (2023)

Chapter 1

2023 Filing Requirements

5

manufacturing, merchandising, or mining, gross income
from that business is the total sales minus the cost of
goods sold. In either case, you must add any income from
investments and from incidental or outside operations or
sources. See Pub. 334.
Dependents. If you could be claimed as a dependent by
another taxpayer (that is, you meet the dependency tests
in Pub. 501), special filing requirements apply. See Pub.
501.

Decedents
A personal representative of a decedent's estate can be
an executor, administrator, or anyone who is in charge of
the decedent's property.
If you are acting as the personal representative of a
person who died during the year, you may have to file a final return for that decedent. You also have other duties,
such as notifying the IRS that you are acting as the personal representative. Form 56, Notice Concerning Fiduciary Relationship, is available for this purpose.
When you file a return for the decedent, either as the
personal representative or as the surviving spouse, you
should enter “DECEASED,” the decedent's name, and the
date of death across the top of the tax return.
If no personal representative has been appointed by
the due date for filing the return, the surviving spouse (on
a joint return) should sign the return and enter in the signature area “Filing as surviving spouse.”
For more information, see Pub. 559.
Surviving spouse. If you are the surviving spouse, the
year your spouse died is the last year for which you can
file a joint return with that spouse. After that, if you don't
remarry, you must file as a qualifying surviving spouse,
head of household, or single. For more information about
each of these filing statuses, see Pub. 501.
If you remarry before the end of the year in which your
spouse died, a final joint return with the deceased spouse
can't be filed. You can, however, file a joint return with your
new spouse. In that case, the filing status of your deceased spouse for their final return is married filing separately.
The level of income that requires you to file an income tax return changes when your filing status
CAUTION changes (see Table 1-1). Even if you and your deceased spouse weren't required to file a return for several
years, you may have to file a return for tax years after the
year of death. For example, if your filing status changes
from filing jointly in 2022 to single in 2023 because of the
death of your spouse, and your gross income is $17,500
for both years, you must file a return for 2023 even though
you didn't have to file a return for 2022.

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Chapter 2

2.
Taxable and Nontaxable
Income
Generally, income is taxable unless it is specifically exempt (not taxed) by law. Your taxable income may include
compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income,
gain from sales or exchanges of property, and business income of all kinds.
Under special provisions of the law, certain items are partially or fully exempt from tax. Provisions that are of special
interest to older taxpayers are discussed in this chapter.

Compensation for Services
Generally, you must include in gross income everything
you receive in payment for personal services. In addition
to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options.
You don’t need to receive the compensation in cash for
it to be taxable. Payments you receive in the form of goods
or services must generally be included in gross income at
their fair market value.
Volunteer work. Don't include in your gross income
amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs.

•
•
•
•

Retired Senior Volunteer Program (RSVP).
Foster Grandparent Program.
Senior Companion Program.
Service Corps of Retired Executives (SCORE).

Unemployment compensation. You must include in income all unemployment compensation you or your
spouse (if married filing jointly) received.
More information. See Pub. 525, for more detailed information on specific types of income.

Retirement Plan Distributions
This section summarizes the tax treatment of amounts you
receive from traditional individual retirement arrangements
(IRAs), employee pensions or annuities, and disability
pensions or annuities. A traditional IRA is any IRA that
isn't a Roth or SIMPLE IRA. A Roth IRA is an individual retirement plan that can be either an account or an annuity
and features nondeductible contributions and tax-free

Taxable and Nontaxable Income

Publication 554 (2023)

distributions. A SIMPLE IRA is a tax-favored retirement
plan that certain small employers (including self-employed
individuals) can set up for the benefit of their employees.
More detailed information can be found in Pub. 590-A,
Pub. 590-B, and Pub. 575.

Individual Retirement Arrangements
(IRAs)
In general, distributions from a traditional IRA are taxable
in the year you receive them. Exceptions to the general
rule are rollovers, tax-free withdrawals of contributions,
and the return of nondeductible contributions. These are
discussed in Pub. 590-B.
If you made nondeductible contributions to a tradi-

TIP tional IRA, you must file Form 8606, Nondeducti-

ble IRAs. If you don't file Form 8606 with your return, you may have to pay a $50 penalty. Also, when you
receive distributions from your traditional IRA, the
amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were
made.
Early distributions. Generally, early distributions are
amounts distributed from your traditional IRA account or
annuity before you are age 591/2, or amounts you receive
when you cash in retirement bonds before you are age
591/2. You must include early distributions of taxable
amounts in your gross income. These taxable amounts
are also subject to an additional 10% tax unless the distribution qualifies for an exception. For purposes of the additional 10% tax, an IRA is a qualified retirement plan. For
more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later.

Pensions and Annuities
Generally, if you didn't pay any part of the cost of your employee pension or annuity, and your employer didn't withhold part of the cost of the contract from your pay while
you worked, the amounts you receive each year are fully
taxable. However, see Insurance Premiums for Retired
Public Safety Officers, later.
If you paid part of the cost of your pension or annuity
plan (see Cost, later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). This tax-free part of the payment is figured when your annuity starts and remains the
same each year, even if the amount of the payment
changes. The rest of each payment is taxable. However,
see Insurance Premiums for Retired Public Safety Officers, later.
You figure the tax-free part of the payment using one of
the following methods.

• Simplified Method. You must generally use this

method if your annuity is paid under a qualified plan (a
qualified employee plan, a qualified employee annuity,
or a tax-sheltered annuity plan or contract). You can't
use this method if your annuity is paid under a nonqualified plan.

• General Rule. You must use this method if your annuity is paid under a nonqualified plan. You generally
can't use this method if your annuity is paid under a
qualified plan.

TIP

Contact your employer or plan administrator to
find out if your pension or annuity is paid under a
qualified or nonqualified plan.

After age 591/2. After you reach age 591/2, you can receive distributions from your traditional IRA without having
to pay the 10% additional tax.

You determine which method to use when you first begin receiving your annuity, and you continue using it each
year that you recover part of your cost.

Required Distributions

Exclusion limit. If your annuity starting date is after
1986, the total amount of annuity income you can exclude
over the years as a recovery of the cost can't exceed your
net cost (figured without any reduction for a refund feature). Any unrecovered cost at your (or the last annuitant's) death is allowed as an “other itemized deduction”
on the final return of the decedent.
If you contributed to your pension or annuity and your
annuity starting date is before 1987, you can continue to
take your monthly exclusion for as long as you receive
your annuity. If you chose a joint and survivor annuity, your
survivor can continue to take the survivor's exclusion figured as of the annuity starting date. The total exclusion
may be more than your cost.

General required minimum distribution rule. If you
are the owner of a traditional IRA, you must generally receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 73 (72 for those
individuals who reach age 72 before January 1, 2023).
See When Must You Withdraw Assets? (Required Minimum Distributions) in Pub. 590-B. If distributions from your
traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay an excise tax for
that year on the amount not distributed as required. For
more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. See also
Excess Accumulations (Insufficient Distributions) in Pub.
590-B.

Publication 554 (2023)

Chapter 2

Cost. Before you can figure how much, if any, of your
pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). Your total cost in the plan includes everything that
you paid. It also includes amounts your employer contributed that were taxable to you when paid. However, see
Foreign employment contributions, later.

Taxable and Nontaxable Income

7

From this total cost, subtract any refunded premiums,
rebates, dividends, unrepaid loans, or other tax-free
amounts you received by the later of the annuity starting
date or the date on which you received your first payment.

have chosen to use the Simplified Method if your annuity
is payable for your life (or the lives of you and your survivor
annuitant) and you met both of the conditions listed
above.

Annuity starting date. The annuity starting date is the
later of the first day of the first period for which you received a payment from the plan or the date on which the
plan's obligations became fixed.

Guaranteed payments. Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of
your investment) is payable even if you and any survivor
annuitant don't live to receive the minimum. If the minimum amount is less than the total amount of the payments
you are to receive, barring death, during the first 5 years
after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments.

The amount of your contributions to the plan may

TIP be shown in box 9b of any Form 1099-R, Distribu-

tions From Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that
you receive.
Foreign employment contributions. If you worked
abroad, certain amounts your employer paid into your retirement plan that weren't includible in your gross income
may be considered part of your cost. For details, see Foreign employment contributions in Pub. 575.
Withholding. The payer of your pension, profit-sharing,
stock bonus, annuity, or deferred compensation plan will
withhold income tax on the taxable part of amounts paid to
you. However, you can choose not to have tax withheld on
the payments you receive, unless they are eligible rollover
distributions. (These are distributions that are eligible for
rollover treatment but aren't paid directly to another qualified retirement plan or to a traditional IRA.) See Withholding Tax and Estimated Tax and Rollovers in Pub. 575 for
more information.
For payments other than eligible rollover distributions,
you can tell the payer how much to withhold by filing a
Form W-4P, Withholding Certificate for Periodic Pension or
Annuity Payments.
Simplified Method. Under the Simplified Method, you
figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly
payments. For an annuity that is payable over the lives of
the annuitants, this number is based on the annuitants'
ages on the annuity starting date and is determined from a
table. For any other annuity, this number is the number of
monthly annuity payments under the contract.
Who must use the Simplified Method. You must use
the Simplified Method if your annuity starting date is after
November 18, 1996, and you meet both of the following
conditions.
1. You receive your pension or annuity payments from a
qualified plan.
2. On your annuity starting date, at least one of the following conditions applies to you.
a. You are under age 75.
b. You are entitled to less than 5 years of guaranteed
payments.
If your annuity starting date is after July 1, 1986, and
before November 19, 1996, and you previously chose to
use the Simplified Method, you must continue to use it
each year that you recover part of your cost. You could
8

Chapter 2

Who can't use the Simplified Method. You can't use
the Simplified Method and must use the General Rule if
you receive pension or annuity payments from:

• A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan; or

• A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5
years of guaranteed payments (defined above).

In addition, you had to use the General Rule for either
circumstance described above if your annuity starting date
is after July 1, 1986, and before November 19, 1996. You
also had to use it for any fixed-period annuity. If you didn't
have to use the General Rule, you could have chosen to
use it. You also had to use the General Rule for payments
from a qualified plan if your annuity starting date is before
July 2, 1986, and you didn't qualify to use the Three-Year
Rule.
If you had to use the General Rule (or chose to use it),
you must continue to use it each year that you recover
your cost.
Unless your annuity starting date was before 1987,
once you have recovered all of your nontaxable investment, all of each remaining payment you receive is fully
taxable. Once your remaining payments are fully taxable,
there is no longer a concern with the General Rule or Simplified Method.
Complete information on the General Rule, including
the actuarial tables you need, is contained in Pub. 939.
How to use the Simplified Method. Complete the
Simplified Method Worksheet in the Instructions for Form
1040 or Instructions for Form 1040-NR, or in Pub. 575 to
figure your taxable annuity for 2023. Be sure to keep the
completed worksheet; it will help you figure your taxable
annuity next year.
To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for
your annuity. How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. For
this purpose, treat an annuity that is payable over the life
of an annuitant as payable for that annuitant's life even if
the annuity has a fixed-period feature or also provides a
temporary annuity payable to the annuitant's child under
age 25.

Taxable and Nontaxable Income

Publication 554 (2023)

You don't need to complete line 3 of the work-

TIP sheet or make the computation on line 4 if you re-

ceived annuity payments last year and used last
year's worksheet to figure your taxable annuity. Instead,
enter the amount from line 4 of last year's worksheet on
line 4 of this year's worksheet.
Single-life annuity. If your annuity is payable for your
life alone, use Table 1 at the bottom of the worksheet to
determine the total number of expected monthly payments. Enter on line 3 the number shown for your age on
your annuity starting date. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996.

Multiple-lives annuity. If your annuity is payable for
the lives of more than one annuitant, use Table 2 at the
bottom of the worksheet to determine the total number of
expected monthly payments. Enter on line 3 the number
shown for the annuitants' combined ages on the annuity
starting date. For an annuity payable to you as the primary
annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. For an annuity that has no primary annuitant and is
payable to you and others as survivor annuitants, combine
the ages of the oldest and youngest annuitants. Don't treat
as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death.
However, if your annuity starting date is before 1998,
don't use Table 2 and don't combine the annuitants' ages.
Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. This
number will differ depending on whether your annuity
starting date is before November 19, 1996, or after November 18, 1996.
Fixed-period annuities. If your annuity doesn't depend in whole or in part on anyone's life expectancy, the
total number of expected monthly payments to enter on
line 3 of the worksheet is the number of monthly annuity
payments under the contract.
Line 6. The amount on line 6 should include all
amounts that could have been recovered in prior years. If
you didn't recover an amount in a prior year, you may be
able to amend your returns for the affected years.

TIP

Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in
later years.

Example. Kris Smith, age 65, began receiving retirement benefits in 2023, under a joint and survivor annuity.
Kris' annuity starting date is January 1, 2023. The benefits
are to be paid over the joint lives of Kris and their spouse,
Pat, age 65. Kris had contributed $31,000 to a qualified
plan and had received no distributions before the annuity
starting date. Kris is to receive a retirement benefit of
$1,200 a month, and Pat is to receive a monthly survivor
benefit of $600 upon Kris' death.
Publication 554 (2023)

Chapter 2

Kris must use the Simplified Method to figure their taxable annuity because the payments are from a qualified
plan and they are under age 75. You can find a blank version of this worksheet in Pub. 575.
Survivors of retirees. Benefits paid to you as a survivor
under a joint and survivor annuity must be included in your
gross income in the same way the retiree would have included them in gross income.
If you receive a survivor annuity because of the death
of a retiree who had reported the annuity under the
Three-Year Rule, include the total received in your income.
The retiree's cost has already been recovered tax free.
If the retiree was reporting the annuity payments under
the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for
in the contract. The resulting tax-free amount will then remain fixed. Any increases in the survivor annuity are fully
taxable.
If the retiree was reporting the annuity payments under
the Simplified Method, the part of each payment that is tax
free is the same as the tax-free amount figured by the retiree at the annuity starting date. See Simplified Method,
earlier.
How to report. If you file Form 1040, 1040-SR, or
1040-NR, report your total annuity on line 5a, and the taxable part on line 5b. If your pension or annuity is fully taxable, enter it on line 5b. Don't make an entry on line 5a.
Example. You are a Form 1040 or 1040-SR filer and
you received monthly payments totaling $1,200 (12
months x $100) during 2023 from a pension plan that was
completely financed by your employer. You had paid no
tax on the payments that your employer made to the plan,
and the payments weren't used to pay for accident, health,
or long-term care insurance premiums (as discussed later
under Insurance Premiums for Retired Public Safety Officers). The entire $1,200 is taxable. You include $1,200
only on Form 1040 or 1040-SR, line 5b.
Joint return. If you file a joint return and you and your
spouse each receive one or more pensions or annuities,
report the total of the pensions and annuities on line 5a of
Form 1040, 1040-SR, or 1040-NR. Report the total of the
taxable parts on line 5b of Form 1040, 1040-SR, or
1040-NR.
Form 1099-R. You should receive a Form 1099-R for
your pension or annuity. Form 1099-R shows your pension
or annuity for the year and any income tax withheld. You
should receive a Form W-2, Wage and Tax Statement, if
you receive distributions from certain nonqualified plans.
You must attach Forms 1099-R or Forms W-2 to
your 2023 tax return if federal income tax was
CAUTION withheld. Generally, you should be sent these
forms by January 31, 2024.

!

Nonperiodic Distributions
If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from

Taxable and Nontaxable Income

9

your income as a recovery of your cost. Nonperiodic distributions include cash withdrawals, distributions of current
earnings (dividends) on your investment, and certain
loans. For information on how to figure the taxable amount
of a nonperiodic distribution, see Taxation of Nonperiodic
Payments in Pub. 575.

!

CAUTION

Form 1099-R. If you receive a total distribution from a
plan, you should receive a Form 1099-R. If the distribution
qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is
the ordinary income part.
More information. For more detailed information on
lump-sum distributions, see Pub. 575 or Form 4972, Tax
on Lump-Sum Distributions.

Tax on Early Distributions
Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you
reach age 591/2 are subject to an additional tax of 10%.
The tax applies to the taxable part of the distribution.
For this purpose, a qualified retirement plan is:

• A qualified employee plan (including a qualified cash

or deferred arrangement (CODA) under Internal Revenue Code section 401(k)),

• A qualified employee annuity plan,
• A tax-sheltered annuity plan (section 403(b) plan),
• An eligible state or local government section 457 de-

ferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a
direct transfer or rollover from one of the other plans
listed here or an IRA), or

• An IRA.

!

560.

• Made as part of a series of substantially equal peri-

odic payments (made at least annually) for your life (or
life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a
qualified retirement plan, the payments must begin after separation from service),

The taxable part of a nonperiodic distribution may
be subject to an additional 10% tax. See Tax on
Early Distributions, later.

Lump-sum distributions. If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before
January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. The part from
active participation in the plan before 1974 may qualify as
capital gain subject to a 20% tax rate. The part from participation after 1973 (and any part from participation before 1974 that you don't report as capital gain) is ordinary
income. You may be able to use the 10-year tax option
(explained in Pub. 575) to figure tax on the ordinary income part.

CAUTION

General exceptions to tax. There are a number of exceptions to the early distribution tax. Some general exceptions include, but are not limited to, distributions:

You may have to pay a 25%, rather than a 10%,
additional tax if you receive distributions from a
SIMPLE IRA before you are age 591/2. See Pub.

• Made because you are totally and permanently disabled,

• Made on or after the death of the plan participant or
contract holder, or

• Made because you separated from service in or after
the year you reach age 55.

Reporting tax. If you owe the tax on early distributions,
you must generally attach Form 5329, Additional Taxes on
Qualified Plans (Including IRAs) and Other Tax-Favored
Accounts, to your 2023 income tax return. If you don’t
have to file a 2023 income tax return, you may file Form
5329 by itself. See the Instructions for Form 5329. In addition, you don’t have to attach Form 5329 to your income
tax return if distribution code 1 (early distribution, no
known exception) is correctly shown in box 7 of all your
Forms 1099-R, and you owe the additional tax on each
Form 1099-R. Instead, multiply the taxable part of the
early distribution by 10% (0.10), or 25% (0.25) if applicable, and enter the result on Schedule 2 (Form 1040),
line 8. See the instructions for Schedule 2 (Form 1040),
line 8, for more information about reporting the early distribution tax.

Tax on Excess Accumulation
To make sure that most of your retirement benefits are
paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive
from qualified retirement plans must begin no later than
your required beginning date. Unless the rule for 5% owners applies, this is generally April 1 of the year that follows
the later of:

• The calendar year in which you reach age 73, or
• The calendar year in which you retire from employment with the employer maintaining the plan.

However, your plan may require you to begin to receive
payments by April 1 of the year that follows the year in
which you reach age 73, even if you haven't retired.
For this purpose, a qualified retirement plan includes:

•
•
•
•

A qualified employee plan,
A qualified employee annuity plan,
An eligible section 457 deferred compensation plan,
A tax-sheltered annuity plan (section 403(b) plan) (for
benefits accruing after 1986), or

• An IRA.
10

Chapter 2

Taxable and Nontaxable Income

Publication 554 (2023)

An excess accumulation is the undistributed re-

TIP mainder of the required minimum distribution that
was left in your qualified retirement plan.

5% owners. If you are a 5% owner, see Pub. 575 for
more information on distribution dates.
Amount of tax. If you don't receive the required minimum
distribution, you may be subject to an additional tax. See
Pub. 590-B and the Instructions for Form 5329 for more information.

If you make this election, reduce the otherwise taxable
amount of your pension or annuity by the amount excluded. The taxable amount shown in box 2a of any Form
1099-R that you receive doesn't reflect the exclusion. Report your total distributions on Form 1040, 1040-SR, or
1040-NR, line 5a. Report the taxable amount on Form
1040, 1040-SR, or 1040-NR, line 5b. Enter “PSO” next to
the appropriate line on which you report the taxable
amount.

Railroad Retirement Benefits

Form 5329. You must file a Form 5329 if you owe a tax
because you didn't receive a minimum required distribution from your qualified retirement plan.

Benefits paid under the Railroad Retirement Act fall into
two categories. These categories are treated differently for
income tax purposes.

Additional information. For more detailed information
on the tax on excess accumulation, see Pub. 575.

Social security equivalent benefits. The first category
is the amount of tier 1 railroad retirement benefits that
equals the social security benefit that a railroad employee
or beneficiary would have been entitled to receive under
the social security system. This part of the tier 1 benefit is
the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. (See Social Security and Equivalent Railroad Retirement Benefits,
later.)

Insurance Premiums for Retired Public
Safety Officers
If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew who is retired because of
disability or because you reached normal retirement age),
you can elect to exclude from income distributions made
from your eligible retirement plan that are used to pay the
premiums for coverage by an accident or health plan or a
long-term care insurance contract. The premiums can be
for coverage for you, your spouse, or dependent(s). The
distribution must be from the plan maintained by the employer from which you retired as a public safety officer.
The distribution can be made directly from the plan to the
provider of the accident or health plan or long-term care
insurance contract, or the distribution can be made to you
to pay to the provider of the accident or health plan or
long-term care insurance contract. You can exclude from
income the lesser of the amount of the premiums paid or
$3,000. You can make this election only for amounts that
would otherwise be included in your income. The amount
excluded from your income can't be used to claim a medical expense deduction.
An eligible retirement plan is a governmental plan that
is a:

•
•
•
•

Qualified trust,
Section 403(a) plan,
Section 403(b) annuity, or
Section 457(b) plan.

If you received a distribution from your eligible retirement plan, and you used part of that distribuCAUTION tion to pay premiums for an accident or health
plan or long-term care insurance contract, you can still exclude from income only the lesser of the amount of the
premiums paid or $3,000. The rest of the distribution is
taxable to you and should be reported as follows.

!

Publication 554 (2023)

Chapter 2

Non-social security equivalent benefits. The second
category contains the rest of the tier 1 benefits, called the
non-social security equivalent benefit (NSSEB). It also
contains any tier 2 benefit, vested dual benefit (VDB), and
supplemental annuity benefit. This category of benefits is
treated as an amount received from a qualified employee
plan. This allows for the tax-free (nontaxable) recovery of
employee contributions from the tier 2 benefits and the
NSSEB part of the tier 1 benefits. VDBs and supplemental
annuity benefits are non-contributory pensions and are
fully taxable.
More information. For more information about railroad
retirement benefits, see Pub. 575.

Military Retirement Pay
Military retirement pay based on age or length of service
is taxable and must be included in income as a pension
on Form 1040, 1040-SR, or 1040-NR, lines 5a and 5b.
But, certain military and government disability pensions
that are based on a percentage of disability from active
service in the U.S. Armed Forces of any country generally
aren't taxable. For more information, including information
about veterans' benefits and insurance, see Pub. 525.

Social Security and Equivalent
Railroad Retirement Benefits
This discussion explains the federal income tax rules for
social security benefits and equivalent tier 1 railroad retirement benefits.

Taxable and Nontaxable Income

11

Social security benefits include monthly retirement, survivor, and disability benefits. They don't include supplemental security income (SSI) payments, which aren't taxable.
Equivalent tier 1 railroad retirement benefits are the part
of tier 1 benefits that a railroad employee or beneficiary
would have been entitled to receive under the social security system. They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits.
If you received these benefits during 2023, you should
have received a Form SSA-1099 or Form RRB-1099
(Form SSA-1042S or Form RRB-1042S if you are a nonresident alien) showing the amount of the benefits.

Social Security Information
Obtaining social security information. Social security
beneficiaries may quickly and easily obtain various information from the SSA's website with a my Social Security
account to:

• Keep track of your earnings and verify them every
year,

• Get an estimate of your future benefits if you are still
working,

• Get a letter with proof of your benefits if you currently
receive them,

•
•
•
•

Change your address,
Get a replacement Medicare card, and
Get a replacement SSA-1099 or SSA-1042S for the
tax season.

Are Any of Your Benefits Taxable?
Note. When the term “benefits” is used in this section,
it applies to both social security benefits and the SSEB
portion of tier 1 railroad retirement benefits.
To find out whether any of your benefits may be taxable,
compare the base amount for your filing status (explained
later) with the total of:

• One-half of your benefits; plus
• All your other income, including tax-exempt interest.
When making this comparison, don't reduce your other
income by any exclusions for:
Interest from qualified U.S. savings bonds,
Employer-provided adoption benefits,
Foreign earned income or foreign housing, or
Income earned in American Samoa or Puerto Rico by
bona fide residents.

Figuring total income. To figure the total of one-half of
your benefits plus your other income, use Worksheet 2-A.
12

Chapter 2

If you are married and file a joint return for 2023, you
and your spouse must combine your incomes and your
benefits to figure whether any of your combined benefits
are taxable. Even if your spouse didn't receive any benefits, you must add your spouse's income to yours to figure
whether any of your benefits are taxable.
If the only income you received during 2023 was

TIP your social security or the SSEB portion of tier 1

railroad retirement benefits, your benefits generally aren't taxable and you probably don't have to file a return. If you have income in addition to your benefits, you
may have to file a return even if none of your benefits are
taxable.

Base Amount
Your base amount is:

• $25,000 if you are single, head of household, or qualifying surviving spouse;

• $25,000 if you are married filing separately and lived
apart from your spouse for all of 2023;

• $32,000 if you are married filing jointly; or
• $0 if you are married filing separately and lived with
your spouse at any time during 2023.

Start or change your direct deposit,

For more information and to set up an account, go to
SSA.gov/myaccount.

•
•
•
•

If that total amount is more than your base amount, part of
your benefits may be taxable.

Repayment of Benefits
Any repayment of benefits you made during 2023 must be
subtracted from the gross benefits you received in 2023. It
doesn't matter whether the repayment was for a benefit
you received in 2023 or in an earlier year. If you repaid
more than the gross benefits you received in 2023, see
Repayments More Than Gross Benefits, later.
Your gross benefits are shown in box 3 of Form
SSA-1099 or Form RRB-1099. Your repayments are
shown in box 4. The amount in box 5 shows your net benefits for 2023 (box 3 minus box 4). Use the amount in
box 5 to figure whether any of your benefits are taxable.

Tax Withholding and Estimated Tax
You can choose to have federal income tax withheld from
your social security and/or the SSEB portion of your tier 1
railroad retirement benefits. If you choose to do this, you
must complete a Form W-4V, Voluntary Withholding Request.
If you don't choose to have income tax withheld, you
may have to request additional withholding from other income, or pay estimated tax during the year. For details,
see Pub. 505, or the Instructions for Form 1040-ES, Estimated Tax for Individuals.

Taxable and Nontaxable Income

Publication 554 (2023)

Worksheet 2-A. A Quick Way To Check if Your Benefits May
Be Taxable
A.

Keep for Your Records

Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include
the full amount of any lump-sum benefit payments received in 2023, for 2023 and
earlier years. (If you received more than one form, combine the amounts from box 5
and enter the total.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A.

Note. If the amount on line A is zero or less, stop here; none of your benefits are
taxable this year.
B.

Enter one-half of the amount on line A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B.

C.

Enter your taxable pensions, wages, interest, dividends, and other taxable income . . . . . . . .

C.

D.

Enter any tax-exempt interest income (such as interest on municipal bonds) plus any
exclusions from income for:
• Interest from qualified U.S. savings bonds,
• Employer-provided adoption benefits,
• Foreign earned income or foreign housing, or
• Income earned in American Samoa or Puerto Rico by bona fide residents . . . . . . . . . . . . . .

D.

E.

Add lines B, C, and D and enter the total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E.

F.

If you are:
• Married filing jointly, enter $32,000;
• Single, head of household, qualifying surviving spouse, or married filing separately and
you lived apart from your spouse for all of 2023, enter $25,000; or
• Married filing separately and you lived with your spouse at any time during 2023,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F.

G.

Is the amount on line F less than or equal to the amount on line E?
No. None of your benefits are taxable this year.
Yes. Some of your benefits may be taxable. To figure how much of your benefits
are taxable, see Which worksheet to use under How Much Is Taxable.

How Much Is Taxable?
If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater
the taxable part of your benefits.
Maximum taxable part. The taxable part of your benefits
usually can't be more than 50%. However, up to 85% of
your benefits can be taxable if either of the following situations applies to you.

• The total of one-half of your benefits and all your other
income is more than $34,000 ($44,000 if you are married filing jointly).

• You are married filing separately and lived with your
spouse at any time during 2023.

If you are a nonresident alien, 85% of your benefits are
taxable. However, this income is exempt under some tax
treaties.
Which worksheet to use. A worksheet to figure your
taxable benefits is in the Instructions for Form 1040. However, you will need to use a different worksheet(s) if any of
the following situations applies to you.
1. You contributed to a traditional IRA and you or your
spouse were covered by a retirement plan at work. In
this situation, you must use the special worksheets in

Publication 554 (2023)

Chapter 2

Pub. 590-A to figure both your IRA deduction and your
taxable benefits.
2. Situation (1) doesn't apply and you take one or more
of the following exclusions.

• Interest from qualified U.S. savings bonds (Form

8815, Exclusion of Interests From Series EE and I
U.S. Savings Bonds Issued After 1989).

• Employer-provided adoption benefits (Form 8839,
Qualified Adoption Expenses).

• Foreign earned income or housing (Form 2555,
Foreign Earned Income).

• Income earned in American Samoa (Form 4563,

Exclusion of Income for Bona Fide Residents of
American Samoa) or Puerto Rico by bona fide
residents.
In these situations, you must use Worksheet 1 in
Pub. 915, to figure your taxable benefits.
3. You received a lump-sum payment for an earlier year.
In this situation, also complete Worksheet 2 or 3 and
Worksheet 4 in Pub. 915. See Lump-Sum Election,
later.

How To Report Your Benefits
If part of your benefits is taxable, you must use Form 1040,
1040-SR, or 1040-NR.

Taxable and Nontaxable Income

13

Reporting on Form 1040 or 1040-SR. Report your net
benefits (the amount in box 5 of your Form SSA-1099 or
Form RRB-1099) on line 6a and the taxable part on
line 6b. If you are married filing separately and you lived
apart from your spouse for all of 2023, also enter “D” to the
right of the word “benefits” on line 6a.
Reporting on Form 1040-NR. Report 85% of the total
amount of your benefits (box 5 of your Form SSA-1042S
or Form RRB-1042S) in the appropriate column of Schedule NEC (Form 1040-NR), line 8.
Benefits not taxable. Report your net benefits (the
amount in box 5 of your Form SSA-1099 or Form
RRB-1099) on Form 1040 or 1040-SR, line 6a. Enter -0on Form 1040 or 1040-SR, line 6b. If you are married filing
separately and you lived apart from your spouse for all of
2023, also enter “D” to the right of the word “benefits” on
Form 1040 or 1040-SR, line 6a.

Lump-Sum Election
You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2023 in your 2023 income, even if the payment includes benefits for an earlier
year.
This type of lump-sum benefit payment shouldn't
TIP be confused with the lump-sum death benefit that
both the SSA and Railroad Retirement Board
(RRB) pay to many of their beneficiaries. No part of the
lump-sum death benefit is subject to tax. For more information about the lump-sum death benefit, visit the SSA
website at SSA.gov, and use keyword: “death benefit.”
Generally, you use your 2023 income to figure the taxable part of the total benefits received in 2023. However,
you may be able to figure the taxable part of a lump-sum
payment for an earlier year separately, using your income
for the earlier year. You can elect this method if it lowers
your taxable benefits. See Pub. 915 for more information.

Repayments More Than Gross
Benefits

If you have any questions about this negative figure,
contact your local SSA office or your local U.S. RRB field
office.
Joint return. If you and your spouse file a joint return,
and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's doesn't, subtract the box 5
amount on your form from the box 5 amount on your spouChapter 2

Repayment of benefits received in an earlier year. If
the total amount shown in box 5 of all of your Forms
SSA-1099 and RRB-1099 is a negative figure, you may be
able to take an itemized deduction for the part of this negative figure that represents benefits you included in gross
income in an earlier year.
The deduction must be more than $3,000 and you have
to follow some special instructions. See Pub. 915 for those
instructions.

Sickness and Injury Benefits
Generally, you must report as income any amount you receive for personal injury or sickness through an accident
or health plan that is paid for by your employer. If both you
and your employer pay for the plan, only the amount you
receive that is due to your employer's payments is reported as income. However, certain payments may not be
taxable to you. Some of these payments are discussed
later in this section. Also, see Military and Government
Disability Pensions and Other Sickness and Injury Benefits in Pub. 525.
Cost paid by you. If you pay the entire cost of an accident or health plan, don't include any amounts you receive
from the plan for personal injury or sickness as income on
your tax return. If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to
include some, or all, of the reimbursement in your income.

Disability Pensions
If you retired on disability, you must include in income any
disability pension you receive under a plan that is paid for
by your employer. You must report your taxable disability
payments as wages on Form 1040, 1040-SR, or 1040-NR,
line 1h, until you reach minimum retirement age. Minimum
retirement age is generally the age at which you can first
receive a pension or annuity if you aren't disabled.
If you were age 65 or older by the end of 2023 or

In some situations, your Form SSA-1099 or Form
RRB-1099 will show that the total benefits you repaid
(box 4) are more than the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a
negative figure (a figure in parentheses) and none of your
benefits will be taxable. If you receive more than one form,
a negative figure in box 5 of one form is used to offset a
positive figure in box 5 of another form for that same year.

14

se's form. You do this to get your net benefits when figuring if your combined benefits are taxable.

TIP you were retired on permanent and total disability

and received taxable disability income, you may
be able to claim the credit for the elderly or the disabled.
See Credit for the Elderly or the Disabled, later. For more
information on this credit, see Pub. 524.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension
or annuity. Report the payments on Form 1040, 1040-SR,
or 1040-NR, lines 5a and 5b. For more information on
pensions and annuities, see Pub. 575.
Note. Don’t include in your income disability payments
you receive for injuries incurred as a direct result of terrorist attacks or military action directed against the United
States (or its allies), whether outside or within the United

Taxable and Nontaxable Income

Publication 554 (2023)

States. For more information, see Terrorist attacks in Pub.
525.

pay for sick leave while a claim is being processed is taxable and must be included in your income as wages.

Retirement and profit-sharing plans. If you receive
payments from a retirement or profit-sharing plan that
doesn't provide for disability retirement, don't treat the
payments as a disability pension. The payments must be
reported as a pension or annuity.

If part of the payments you receive under FECA
reduces your social security or equivalent railroad
CAUTION retirement benefits, that part is considered social
security (or equivalent railroad retirement) benefits and
may be taxable. For a discussion of the taxability of these
benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier.

Accrued leave payment. If you retire on disability, any
lump-sum payment you receive for accrued annual leave
is a salary payment. The payment isn't a disability payment. Include it in your income in the tax year you receive
it.

Long-Term Care Insurance Contracts
In most cases, long-term care insurance contracts are
treated as accident and health insurance contracts.
Amounts you receive from them (other than policyholder
dividends or premium refunds) are generally excludable
from income as amounts received for personal injury or
sickness. However, the amount you can exclude may be
limited. Long-term care insurance contracts are discussed
in more detail in Pub. 525.

Workers' Compensation

If part of your workers' compensation reduces
your social security or equivalent railroad retireCAUTION ment benefits, that part is considered social security (or equivalent railroad retirement) benefits and may
be taxable. For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier.

!

Return to work. If you return to work after qualifying for
workers' compensation, salary payments you receive for
performing light duties are taxable as wages.

Other Sickness and Injury Benefits
In addition to disability pensions and annuities, you may
receive other payments for sickness or injury.
Federal Employees' Compensation Act (FECA). Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of
death, aren't taxable. However, you are taxed on amounts
you receive under this Act as continuation of pay for up to
45 days while a claim is being decided. Report this income on Form 1040, 1040-SR, or 1040-NR, line 1a. Also,
Chapter 2

Other compensation. Many other amounts you receive
as compensation for sickness or injury aren't taxable.
These include the following am