The tier I portion of a railroad retirement annuity that is actually equivalent to a social security benefit is treated as a social security benefit for Federal income tax purposes. Depending on the amount of other income received in the taxable year, a portion of these benefit payments may be subject to Federal income tax.
Tier I benefits exceeding social security benefits, such as retirement benefits payable between ages 60 and 62, and many occupational disability annuities, plus the tier II portion of railroad retirement annuities, vested dual benefits, and supplemental annuities paid by the RRB are treated like private pensions for Federal income tax purposes. The Railroad Retirement Act specifically exempts benefits paid by the RRB from State and local income tax.
The RRB and the Social Security Administration issue tax information statements to annuitants each January. In the absence of a request not to withhold, taxes are withheld from U.S. citizens or residents whose railroad retirement benefits in excess of the social security equivalent level total more than certain annual threshold amounts. Any amounts withheld during the taxable year are reflected on the annual statements.