Tax Withholding

STRS Ohio is required to withhold federal taxes from STRS Ohio benefits unless you direct otherwise.

Federal Income Tax
Beginning with the first payment, STRS Ohio retirement benefits are taxable. 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 IRS determines these contributions are to be spread over 25 years, you will receive $1,000 tax-free for the first 25 years of your retirement. Information regarding your excludable amount will be sent to you shortly after your retirement account is finalized.

We 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.

Under federal tax laws, a PLOP payment paid directly to you that is eligible for rollover 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 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 the benefit is subject to Ohio income tax for Ohio residents. On request, we will withhold Ohio income taxes.

A PLOP payment paid directly to you is subject to state income tax if you reside in Ohio, but STRS Ohio cannot withhold Ohio income tax from your PLOP payment. Please contact a tax consultant or the Ohio Department of Taxation for more information.

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. We are not authorized to withhold this tax from retirement income unless the benefit is affected by a Qualified Excess Benefit Arrangement (QEBA).

Taxable Income
At the end of the calendar year, benefit recipients receive a 1099-R form for monthly benefits showing “annual gross benefits” and “taxable amount” as computed by STRS Ohio.

If you receive a PLOP payment, a 1099-R form will be mailed shortly after your PLOP payment so you may file quarterly estimates if required.

For more details about taxation of benefits, contact the Internal Revenue Service, the Ohio Department of Taxation or a qualified tax consultant. STRS Ohio cannot provide tax advice.