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.
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.
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.
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.
Important Tax Considerations for Lump-Sum Withdrawals
If you choose to withdraw your STRS Ohio account, there are important tax implications.
If you choose to have your withdrawal paid directly to you:
- Your payment will be taxed in the year it is received.
- We will withhold 20% of the payment and send it to the IRS
to be credited against your taxes.
- If you receive the payment before age 59-1/2, you may have to pay a 10%
tax penalty for an early withdrawal.
You may roll over your withdrawal amount to an eligible retirement account
that will accept your rollover and:
- Your payment will not be taxed in the current year and no income
tax will be withheld.
- Your withdrawal will be paid directly to an account or fund that will accept
your rollover.
- Your payment will be taxed when it is removed from your account or fund.*
There are other tax implications if you withdraw your STRS Ohio account. Review our brochure titled Important Information About Withdrawing Your STRS Ohio Account and consult a professional tax advisor for more information. STRS Ohio cannot provide tax advice.
Note: Beginning in the year you reach age 70-1/2 or terminate employment, whichever is later, a certain portion of your payment cannot be rolled over because it is a “required minimum payment” that must be paid to you. STRS Ohio can tell you if your payment includes amounts that cannot be rolled over.
