There are several retirement income exclusions you may qualify to use that will reduce your taxable income.
The exclusion amounts are being increased over a four-year period, beginning with Tax Year 2017, as shown below:
You qualify for the pension exclusion if:
If you qualify, you can claim the lesser of your actual taxable pension income or the maximum pension exclusion amount for your filing status (see chart above).
Note: When you and your spouse/civil union partner file a joint return and only one of you is 62 or older or disabled, you can still claim the maximum pension exclusion. However, you can exclude only the pension, annuity, or IRA withdrawal of the qualified spouse/civil union partner.
Other Retirement Income Exclusion
You may be able to exclude other types of income (wages, interest, dividends, etc.) from your total income. There are two parts to these exclusions, and each part has different eligibility requirements.
Part I: Unclaimed Pension Exclusion. If you did not use the maximum pension exclusion amount for your filing status, you qualify to use the unclaimed portion if:
Note: When you and your spouse/civil union partner file a joint return and only one of you is 62 or older, you can exclude only the income of the qualified spouse/civil union partner.
Part II: Special Exclusion. This exclusion is for taxpayers who cannot receive Social Security or Railroad Retirement benefits. Since most taxpayers qualify for those benefits, few taxpayers are eligible to use the special exclusion. If you qualify, you can claim this benefit even if you used your maximum pension exclusion. You qualify if: