Railroad retirement benefits subtraction

Federal law exempts railroad retirement benefits from state income taxes. Individuals may claim a subtraction on the Subtractions from Income Schedule (DR 0104AD) for any railroad retirement benefits reported on Form RRB-1099 or Form RRB-1099-R and included in their federal taxable income. Railroad retirement benefits that are eligible for the subtraction include:

Tier I benefits (both Social Security Equivalent Benefits (SSEB) and Non-Social Security Equivalent Benefits (NSSEB));

Tier II benefits;

Vested dual benefits;

Supplemental annuity benefit; and

Railroad disability benefits.

Not all Tier I SSEB benefits are included in federal taxable income. Tier I SSEB benefits are reported and treated in the same manner as Social Security benefits, and the taxpayer must determine the taxable amount. To determine the allowable subtraction for Tier I SSEB benefits, please see IRS Publication 915 , the Explanation of Form RRB 1099 , or the section on Social Security benefits earlier in this publication.

Railroad retirement benefits qualify regardless of the individual’s age. The subtraction for railroad retirement benefits is not subject to the same $20,000 and $24,000 limits as the pension and annuity subtraction. If a taxpayer receives both railroad retirement benefits and pension and annuity benefits, the amount of railroad retirement benefits is not considered in determining the allowable subtraction for other pension and annuity benefits.