Tax Withholding

Federal income tax

Beginning with the first payment, STRS Ohio retirement benefits are taxable. STRS Ohio will withhold federal taxes from your benefits unless you direct otherwise. If federal taxes are not withheld, you will be responsible for filing federal quarterly estimates. You can estimate your federal tax withholding using our W4-P Tax Withholding Estimate calculator.

If you paid taxes on some of your contributions, a small percentage of your benefit will be tax-free until your taxed contributions are exhausted. For example, if you paid taxes on $25,000 of contributions and the Internal Revenue Service (IRS) determines these contributions are to be spread over 25 years, $1,000 of your retirement benefit will be tax-free for the first 25 years of your retirement. Information regarding any amount excludable from tax will be sent to you after your retirement account is finalized and will be reflected on your 1099-R form.

Under federal tax laws, a Partial Lump-Sum Option Plan (PLOP) payment that is eligible for rollover, but is paid directly to you instead, is subject to a mandatory 20% federal tax withholding. In addition, you may be subject to a 10% penalty for early withdrawal. This penalty does not apply if you withdraw the lump sum after you reach age 59-1/2, or you have separated from service and have taken payment in or after the year in which you turned age 55.

Ohio income tax

The taxable portion of a retirement benefit or a PLOP payment paid directly to you is subject to Ohio income tax for Ohio residents. On request, we will withhold Ohio income taxes.

Income tax — other states

If you are a resident of another state, your state tax liability is governed by the laws in that state. STRS Ohio cannot withhold tax for states other than Ohio.

Local or municipal taxes

STRS Ohio retirement benefits are exempt from local or municipal taxes in Ohio.

School district income tax

STRS Ohio retirement benefits may be subject to local school district income taxes in Ohio. Some districts in Ohio have a provision where the school district income tax applies to earned income only.

Taxable income

Following the end of the calendar year, benefit recipients who have not opted out of receiving paper copies will be mailed a 1099-R form for monthly benefits showing annual gross benefits and taxable amount as computed by STRS Ohio. You will receive a separate 1099-R form for a PLOP payment if elected. The 1099-R form is also made available in your Online Personal Account.

For more details about taxation of benefits, contact the IRS, the Ohio Department of Taxation or a professional tax advisor. STRS Ohio cannot provide tax advice.