Police officer accidental disability pension

[Ashel56]

My husband is a retired police officer receiving an accidental disability pension from MFPRSI. We have been told this pension is not taxed. We do not receive a 1099-R. It is not based on years of service. We have only received an end-of-year statement showing the total amount he received for the year next to “non-taxable benefit”. This question is for the 2022 tax year. Does this need to be reported anywhere on our federal or state of Iowa tax returns? 

[MichaelG81]

It depends, if you receive a 1099-R this will need to be reported. However, if the portion of the accidental disability pension that is greater than the basic 60% formula will be reported to the IRS and the State of Iowa as taxable income. This requirement is based upon guidance received from the Internal Revenue System relating to the taxability of pension payments from MFPRSI. You should then receive a form if that applies to you. 

See MFPRSI FAQs.

@Ashel56

[Ashel56]

We do not receive a 1099-R. We only receive the end-of-year total from his latest payment statement. His pension is based on the 60% formula and NOT years of service. In this case, do we report this income anywhere on either our federal or Iowa return (even if it is non-taxable)?

[ZhuoliA]

As long as his pension is not exceeding the 60% formula, it will be non-taxable and you don't need to report those anywhere on either your federal or Iowa return. MichaelG81 is correct that you will receive a form if this applies to you. You will receive a memo early in February with the guidelines concerning the filing requirements per MFPRSI FAQs - When will I receive information in regards to the Earnings Test and when is the deadline?

@Ashel56

[Ashel56]

We do not receive a memo explaining our filing requirements from MFPRSI for our income taxes in February. The February memo you are referring to is one pertaining to the Earnings Test. This memo covers our filing requirements for that Earning Test that we must submit to MFPRSI, which has nothing to do with how we submit our pension on our income taxes. 
Am I to understand that if my husband does not receive a 1099-R, he does not need to include this income on our tax returns? 
As as an additional note, I did call MFPRSI today to ask this question and they said to talk to our tax preparer. I use TurboTax and I am our tax preparer, so that is why I need to make sure this is all correct. 

[JosephS1 · Accepted solution]

No, your husband's disability income, as you described it, is not taxable and does not need to be reported on your tax return for Federal tax purposes.  Some states, while not being taxable, may take the amount received as household income as it pertains to possible income level tax credits you may be entitled to, but only for that purpose.  The link below should assist you also:

Disability Income Taxability

@Ashel56