Federal Income Tax
A major portion (usually 95-98%) of the benefits you receive from TRS are subject to federal income tax. During the retirement process, you must designate your withholdings. The calculation of the exact taxable amount and the monthly non-taxable exclusion amount is made during the regular processing of your retirement. This calculation is based on IRS tables and regulations and your age. Once the total of monthly non-taxable exclusions equals the total of taxed contributions made to TRS (contributions to TRS after July 1, 1987 have not been taxed), the full monthly benefit is subject to federal tax.
Federal law requires automatic withholding of income tax from the taxable retirement benefit unless you elect no withholding. The IRS requires TRS to inform you that if the election is made not to have tax withheld from your retirement benefit, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if withholdings and estimated tax payments are not sufficient.
You will receive an IRS form 1099R each January detailing the benefits paid to you, the taxable amount of the benefits, and any taxes that were withheld for your use in filing your annual income tax returns. Additional information to be used for tax purposes is provided to you with your first retirement payment.
State of Georgia Income Tax
The monthly benefits from TRS are subject to Georgia income tax for Georgia residents. During the retirement process, you must designate your withholdings. If you are a resident of another state you should contact that state’s Department of Revenue regarding the tax status of your Georgia benefits. You may change your federal or state withholdings at any time via your online retiree TRS account or by submitting the applicable withholding form to TRS.