Railroad Retirement Taxability Step by step Solution with Explanation

Your question:

Zelda retired from the railroad after 45 years of service at the age of 70 in 2021. She is a widow and files as single. She received a Form RBR-1099 with $16,500 in box 5. She received a Form RBR-1099-R with $19,222 in box 7 and reports it on line 5b of her Form 1040/1040-SR. She received no other taxable income. What percentage of her Tier 1 benefits maybe taxable?

a. 0%

Railroad Retirement Taxability Answers and Explanation

Tier 1 vs. Tier 2 Benefits:

The Railroad Retirement system has two tiers:

1. Social Security Equivalent Benefit (SSEB): This portion of Tier 1 benefits is calculated similarly to Social Security and is treated the same way for tax purposes. Since Social Security benefits generally aren't taxable unless your total income exceeds a certain threshold, the SSEB portion of Tier 1 benefits also enjoys the same tax-free status.

2. Non-Social Security Equivalent Benefit (NSSEB): This portion represents additional benefits beyond the Social Security equivalent. However, even the NSSEB portion may not be taxed unless your total income is very high.

• Single Filer with No Other Income: With no other income, Zelda's total income is likely well below the threshold for taxing Social Security or Tier 1 benefits.