100% of CT Teacher pension should be untaxed, TurboTax is using 50% - how to correct? Thanks, DR

[MayaD]

A taxpayer is allowed a subtraction modification of 50% of the income received from the State Teachers’ Retirement System. This modification applies to the extent such income is properly included in the taxpayer’s federal AGI for the taxable year.

CT Teachers' Retirement Board

[rogersdan164]

MayaD,  Thanks for the reply but the 50% deduction applied to 2021.  I clipped the following from the CT Department of Revenue website:  

Subtraction Modification for Pension and Annuity Income

Legislation accelerates the phase‑in of the subtraction modification for pension and annuity income. Subject to income thresholds, and effective for taxable years commencing on or after January 1, 2022, eligible persons are authorized to subtract from their adjusted gross income 100% of pension and annuity income when calculating their Connecticut income tax liability.

Last year TT deducted 50% of my CT pension income from my AGI, this year I expected it would deduct 100% but that isn't the case.

[ShirlynW]

Yes. Taxpayers can subtract part of the income they received from a pension or annuity if the taxpayer’s federal AGI is less than:

• $75,000 for single filers, married taxpayers filing separately, and heads of households; and
• $100,000 for married taxpayers filing jointly. ( Sec. 12-701(a)(20)(B)(xxi), G.S.)

The subtraction amount is:

• 14% of pension or annuity income included in federal AGI for the 2019 tax year;
• 28% of the income included in federal AGI for the 2020 tax year;
• 42% of the income included in federal AGI for the 2021 tax year;
• 100% of the income included in federal AGI for tax years beginning after 2021. ( Sec. 12-701(a)(20)(B)(xxi), G.S.)

For more Information

[rogersdan164]

If I understand you correctly, TT is not handling the CT pension revenue correctly.  TT is only deducting 50% of my pension from my AGI, but it should be 100%.  Maybe, the CT tax form is still being updated.

[ErnieS0]

TurboTax is correctly computing the Connecticut Teacher’s Retirement Pay exclusion. It’s 50%.

Here are the instructions for the 2022 CT-1040:

Subtract 50% of the income received from the Connecticut Teachers’ Retirement System, provided you properly included such income in federal adjusted gross income for federal income tax purposes. You must have received a Form 1099‑R from the Connecticut Teachers’ Retirement Board to be eligible for the subtraction modification.

2022 Connecticut Resident Income Tax Return Instructions

[rogersdan164]

Thanks for the CT 1040 instructions.  I see the section that indicates a 50% "subtraction modification".  I'm curious why that differs from the https://portal.ct.gov/-/media/DRS/Publications/pubssn/2022/SN-2022-4.pdf which states that as of Jan 1, 2022 the subtraction modification is 100%.

[MayaD]

The General Pension and Annuity Exemption, income-eligible taxpayers may deduct 100% of their qualifying pension and annuity income from their Connecticut taxable income. You are eligible for the exemption if your total federal AGI is below (1) $75,000 for single filers, married people filing separately, and heads of household or (2) $100,000 for married people filing jointly. Pension and annuity income is fully taxable for taxpayers with AGIs equal to or greater than these thresholds

For the Teacher’s Retirement System (TRS) Pension Income, you may deduct 50% of TRS pension income from your Connecticut taxable income.

Taxpayers who are eligible for both the general pension and annuity exemption and the TRS pension exemption may take whichever one is most favorable to them.

For more information: Income Tax Deductions for Retirement Income

[rogersdan164]

Most responses indicate that 50% of the Teacher Retirement Pension income is not taxable (assuming AGI is less than $75k for a single person), however TT is only reducing income by  50%.  TT is NOT treating teacher's pensions correctly.  I have talked with reps from AARP who are doing taxes for the elderly in CT and they have confirmed that the reduction should be 100%.  The 50% reduction applied to last year's taxes.

[GeorgeM777]

At least part of the issue here seems to be whether the general pension and annuity exemption is the same thing as the Teacher's Retirement System pension exemption.  It would seem they are different; however, you are correct in that for tax year 2021 the TRS pension exemption was 50% provided the income thresholds were met.  

Here is a quote from a Research Report compiled by the Office of Legislative Research which indicates that when CT taxpayers are eligible for both the general pension and annuity exemption and the TRS pension exemption, they can select the one that is most favorable to them.

Taxpayers who are eligible for both the general pension and annuity exemption and the TRS pension exemption may take whichever one is most favorable to them (CGS § 12-701(a)(20)(B)(xx), as amended by PA 21-2, June Special Session, § 433).

Here is a link to the above Research Report

Office of Legislative Research

Do you know if you are eligible for both pension systems referenced herein?

@rogersdan164 

[Ed P]

Here's the message cut and pasted from the State of CT 2022 Website

 

Income Tax Exemption for Teacher Pensions

Per the 2022 Connecticut Resident Income Tax Return Instructions, a taxpayer is allowed a subtraction modification of 100% of the income received from the State Teachers’ Retirement System. This modification applies to the extent such income is properly included in the taxpayer’s federal AGI for the taxable year.

If you have questions on your Connecticut tax obligation, please contact the Department of Revenue Services at [phone number removed] (from anywhere) or [phone number removed] (in CT) or visit their website at portal.ct.gov/drs.

[DawnC]

There are 2 different subtractions.   From the 2022 CT-1040 instructions.   Page 9:   Line 45: 50% of Connecticut Teachers’ Retirement Pay Subtract 50% of the income received from the Connecticut Teachers’ Retirement System, provided you properly included such income in federal adjusted gross income for federal income tax purposes. You must have received a Form 1099‑R from the Connecticut Teachers’ Retirement Board to be eligible for the subtraction modification.

Page 10:   Line 48b: 100% of Pension or Annuity Income If your filing status is single, married filing separately, or head of household with federal AGI for the taxable year of less than $75,000 or married filing jointly with federal AGI of less than $100,000, and you receive income from certain pensions and annuities, such as from a defined benefit plan, 401(k), 403(b) or 457(b) plans, you qualify for this subtraction modification.  

Retired teachers may claim either the teachers’ pension subtraction modification or the pension and annuity subtraction modification (if their federal adjusted gross income is below the applicable threshold) on the income they receive from the Connecticut Teachers’ Retirement System. Connecticut law does not allow a double benefit for the same income.

Example:   Anna’s filing status on her Connecticut resident return is single. She receives $30,000 from the Teachers’ Retirement System and $38,000 in pension payments from XYZ Corporation for the taxable year.  Both amounts are includible in Anna’s federal gross income, and her federal AGI is less than $75,000. On the Connecticut return for the taxable year, Anna may subtract $15,000 ($30,000 x 50%) on Line 45, Schedule 1, Form CT‑1040, and $38,000 as a pension and annuity income subtraction modification on Line 48b, Schedule 1, Form CT‑1040.   @Ed P 

[allyra60]

Hello!

I file my mom's taxes every year for her, and just found out about this. How do I notate in turbotax that she should be receiving the 50%? Or do I do it manually?  How can I see if turbotax is doing it correctly? It doesn't seem to show me at all whether it's calculating it or not. 

Also, how can I see if turbotax did it automatically in previous years or not? I've used it for the last 5 years to file her taxes. Do I need to file an amendment for her?  Crazy it never gives me a notice or anything about it.

[DawnC]

Look on her CT tax return - Line 45 and/or 48b.   You should see a subtraction on that line.   If you already filed and it is not there, you can file an amendment; you can go back 3 years to amend past returns.  

When you click through the CT state return, you will come to the following screen that asks about Teacher Retirement Income.   See the note on the screen.   Depending on her income, TurboTax will subtract the income automatically.      @allyra60