"Months of service credit earned" does not appear on form 1099 R. Kentucky state tax "Service Credit Earned" section wants this from 1099-R.

[trek1492]

Filling out Kentucky Pension Income Exclusion Worksheet.  I have never had to figure out months of service credit before.  In 2017 return I just entered my Taxable Pension amount and had this excluded from my Federal Gross income. 

[DanielV01 · Accepted solution]

KY income tax law changed this past year.  One of the biggest changes was the Pension exclusion being reduced from $41,110 to $31,110.  More people are seeing taxable pension this year because of this.

However, If you have a KY government pension (which includes Teacher's and Board of Ed pensions), not all of your pension is taxable, if you have service before 1/1/1998.  There may be (and should be) a percentage figure on your State issued 1099-R.  If there is, you will do the following:   

1. On the screen Government Pension Income (Retired Before 1998):  If you retired before 12/31/1997, all of your government pension is exempt from taxes.  In this case, enter the Payer's Name on your 1099-R, the date that you retired, and the amount in Box 1.  Your whole retirement income is exempt, and you do nothing more.  If you retired after December 31, 1997, leave this screen blank.
2. On the screen Government Pension Income (Retired After 1997):  If you retired after 12/31/1997, but worked with the state from before that period, a portion of your Pension is not taxable.  Click yes on that screen if this is the case.
3. Government Pension Income (Retired After 1997) (screen two):  Input the name of the payer, the date you retired, and the taxable pension amount (box 2a) of this year's 1099-R.
   
4. Exempt Amount or Percentage.  Your W-2 should have either a Percentage on it or an Exempt amount on it.  Click the radial that corresponds to this.  If you had a Government pension without this information, but you qualify to have some pension exempt, click Neither and then Continue
   
5. If you do not have an amount or percentage, you need to enter the total amount of service credit months you had and the number of credit months after 1997.  (A service credit month is a month you were employed or purchased as credit through prior laws for retirement calculations).  The percentage that calculates (# of months after 1997 divided by all service credits) is the taxable percentage of your pension.
   

If, after your taxable percentage is applied, your final "taxable pension" (Reported on Schedule P) is less than $31,1 $31,110, then your remaining pension is not taxable in Kentucky.  For more information on this and other KY tax law changes, please see this link:  KY Income tax Law Changes