Your retirement benefit is subject to federal income taxes as well as state income taxes if you live in a state that taxes income. The exception is if you retired under the guaranteed benefit formula for work-related disability.
If you live outside Virginia, contact your state’s taxation agency for information on state income taxes.
If the value of your Basic Group Life Insurance is more than $50,000, the cost of the amount over $50,000 is subject to income and FICA taxes. VRS automatically withholds these taxes and provides information to you every year on a W-2.
Tax Information for Retired Public Safety Officers
If you are a retired public safety officer, you may be able to exclude a certain amount per year from your retirement income used for qualified health insurance premiums or long-term care insurance premiums. Premiums covering yourself as well as your spouse and/or dependents are eligible for this exclusion.
Your 1099-R form, which is available online through your myVRS account, shows the amount of health insurance premiums VRS deducted from your monthly retirement benefit, less any health insurance credit you may have received. To find out if you are eligible for benefits under the H.E.L.P. Retirees Act, consult a tax advisor or contact the IRS at 1-800-829-1040 or visit www.irs.gov.
myVRS Income Tax Tool
An income tax calculation tool available through myVRS allows you to submit tax withholding changes online. After you submit the changes, your account is updated automatically to reflect the changes. You also can use the tool to see the most advantageous tax withholding for you before you make changes.
IRS Form 1099-R
If you received a retirement benefit from VRS last year, you will receive a form 1099-R in late January. Use this to complete your federal and state income tax returns. Look for your 1099-R in the mail and in your myVRS account by the end of January.
Work-related disability retirees will not receive a 1099-R because VRS does not deduct federal or state taxes from this benefit. You will receive an annual income verification letter by the end of January for record filing purposes.
What does your 1099-R show?
- Total amount of your monthly VRS benefit
- Taxable amount of your benefit
- Total amount of federal and state tax withheld from your benefit during the year
- Amount of your benefit that is not taxable
- Whether your benefit is a retirement benefit, disability benefit or survivor benefit
- Total of health insurance premiums for the year. If you receive a health insurance credit reimbursement, this amount will reflect what you paid in premiums, less the amount of your health insurance credit. Your health insurance credit reimbursement is a non-taxable benefit and is not included on your 1099-R form.
Note: If you retired under the guaranteed benefit for work-related disability, your benefit is exempt from taxes and will not show on your 1099-R.
What if you read your 1099-R and decide to change your tax withholding?
Visit your myVRS account. The income tax calculation tool in myVRS allows you to see the impact of any changes to your tax withholding amount and to submit your changes online. Your account will be updated automatically.
Live outside of Virginia?
Contact your state’s taxation agency for more information about completing your state income tax returns. If your permanent residence is outside of Virginia, you are not subject to Virginia income tax withholding on your VRS benefit.