How do I calculate federal pension income and percentage?

You may be able to subtract some or all of your taxable federal pension included in your 2013 federal income. This includes benefits paid to the retiree or the beneficiary. It does not include disability payments if you have not reached the minimum retirement age. The subtraction amount is based on the number of months of federal service or points earned before and after October 1, 1991:

  1. If all your months of federal service or points were before October 1, 1991, subtract 100 percent of the taxable amount of federal pension income you reported on your federal return.
  2. If you have no months of service or points before October 1, 1991, you cannot subtract any federal pension.
  3. If your service or points occurred both before and after October 1, 1991, subtract a percentage of the taxable federal pension income you reported on your federal return. To determine your percentage, divide the months of service or points before October 1, 1991, by the total months of service or points earned. Round to three places (example: .4576 = 45.8 percent). Once you've determined the percentage, it will remain the same each year. Enter the percentage on the first line. If you have two federal pensions, enter the second percentage on the second line, and enter your total subtraction amount on the third line. Figure the percentage for each pension separately.

    Federal pension subtraction formula:

    Months of service or points before 10/1/91 X Federal pension amount included in federal income = Oregon Subtraction
    Total months of service or points

    Example: Ann worked for the U.S. Forest Service from March 31, 1977, until January 7, 2012. She worked a total of 417 months; 174 months were worked before October 1, 1991. In 2013, she received taxable federal pension income of $35,000. Using the formula, her federal pension subtraction is:

    174X$35,000=$14,595
    417

    She can subtract 41.7 percent--or $14,595 ($35,000 * 0.417)--of her taxable federal pension. She will continue to subtract 41.7 percent from Oregon income in future years.

Deluxe Edition

Includes All Free Features PLUS:

Audit Assist

Protect your taxes with Audit Assist!

Over 1.7 million taxpayers were audited last year... let us help. Our tax professionals will assist you if you are audited by the IRS. Get the peace of mind that comes from knowing you are covered.

Included with DELUXE...
Find out More!

Free Edition

FREE Federal, FREE e-file:

Our online application is designed to be simple and fast. Most returns can be completed within 30 minutes. No software to download. Use any computer that has an internet connection.

© 2002-2014 FreeTaxUSA, a TaxHawk, Inc. owned and operated website - Terms of Use