railroad retirement taxability answers and explanation
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:
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.
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.