How to Handle Retirement Income on Your Tax Return. By: Aaron Steele


In this article, we shall answer an important question: How can an employee handle retirement income on their tax return? Let us look at the problem in detail and try to answer the query. 

Let’s say a client has a $21,105 taxable interest income before taking personal exemptions and $3,862 in pension income. He is 72 years old and getting Social Security retirement benefits. He is not including the $3,862 on Line28a. For Line 28b, “Other Retirement Income Exclusion.” Want to know the rule for that? According to Worksheet D, $60,000 is the exemption amount. Can he put the difference on that line, which would make any extra income down to zero? Is that right?

 — question raised by the taxpayer

Our answer to the taxpayer based on the information given is: it sounds right.

The Other Retirement Income Exclusion (ORIE) amount is used by taxpayers who fail to use their entire pension exclusion from Worksheet D ultimately.

Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton, said a person is eligible for the Other Retirement Income Exclusion just like the pension exclusion, with additional criteria for the ORIE if you or your spouse are not earning income from any job, partnership income, any income from a trade or business or S Corporation income exceeding $3,000 for the year, or income except that who otherwise would qualify for the ORIE amount. 

He answered this because the client did not mention any income from partnerships, S Corps, or any other source, so the taxpayer raising this question can include $21,105 of taxable interest income as part of the ORIE.

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