As a retiree, it is important to understand the taxability of your LAGERS retirement benefit. Below gives you a brief explanation of taxation of your LAGERS benefit.
Is my benefit subject to Federal income tax?
Yes. However, if you were required to contribute a percentage of salary while employed, those contributions have already been taxed. Once you begin receiving a monthly benefit, a portion of your benefit will not be taxable.
Is my benefit subject to Missouri income tax?
Depending on your adjusted gross income, your public pension benefits may be up to 100% exempt from Missouri state income tax. Married couples with an adjusted gross income of less than $100,000 and single individuals with an adjusted gross income of less than $85,000, may qualify for their public pension income to be 100% tax exempt. The exemption amount is limited to the maximum social security amount for each spouse. If your income exceeds the eligibility requirements, you may qualify for a partial exemption. To learn more visit www.dor.mo.gov or contact a qualified tax professional.
Will LAGERS withhold taxes from my monthly benefit?
Yes. If you choose, LAGERS will withhold Federal and /or State of Missouri income taxes. You can change your tax withholding at any time throughout retirement. Also, if you move out of state, notify LAGERS to stop withholding State of Missouri income taxes (if applicable).
Will LAGERS produce tax documentation I can use to file my taxes?
LAGERS will send you a 1099-R by January 31st of every year. The 1099-R illustrates the taxable income that you received from LAGERS, the amount of taxes withheld from your benefit, and much more. You also can access these documents on the myLAGERS portal.
I am going to receive a Partial Lump Sum (PLUS). How are taxes applied to the Partial Lump Sum?
Taxation of the Partial Lump Sum depends on how you decide receive the money. If you elect to receive the benefit directly, the Partial Lump Sum (PLUS) is fully taxable and LAGERS has been instructed to forward 20% of the PLUS to the IRS. The 20% withholding will not include any State of Missouri income taxes and depending on your income level, your tax liability may be more or less when you file your taxes.
However, you may delay the taxation through a direct rollover of the PLUS into a qualified retirement account (401k, 457b, IRA). When the PLUS is rolled over, the lump sum takes the characteristics of the account where the money is being deposited and 20% is not withheld for the IRS. Instead, the money will be taxed when you withdraw it from the qualified retirement account.