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Indiana Public Retirement System

Indiana Public Retirement System (INPRS) > My Fund > Police and Firefighters > Police and Firefighters Member Handbook: Taxation of Retirement Benefits Police and Firefighters Member Handbook: Taxation of Retirement Benefits

When you retire, you will be taxed on all of your benefit payments when they are received, except a portion attributable to your six percent (6%) member “tax basis” (the amount of your six percent (6%) contributions that you were taxed on when the contributions were paid to the 1977 Fund). “Picked up” contributions are not included in tax basis because they are not included in income when the contribution is made. A portion of your non-taxable amount will be recovered from each benefit payment over a pre-determined number of payments based on your age at the time your benefits start. This schedule is set by Internal Revenue Service regulations.

Once all non-taxable amounts have been excluded from your benefit payments, one hundred percent (100%) of all remaining benefit payments will be included as taxable income.

The 1977 Fund will report to you each year on a form 1099-R the taxable and non-taxable (if any) portion of your benefits.

When applying for the 1977 Fund benefits, make sure you complete the tax withholding forms.

Tax Withholding

INPRS is required to withhold income taxes on distributions. INPRS is also required to withhold federal income taxes on monthly payments unless you elect not to have taxes withheld. When applying for the 1977 Fund benefits, make sure you complete the tax withholding forms.

The taxation rules are complex, so if you need additional information, you should obtain IRS Publication 575; or, if you need further assistance, you should contact your local IRS office or a tax consultant.

Section Eight: Disability Benefit Provisions