Annuity
Federal Annuity Tax Calculator
Every other calculator here gives you a gross annuity. This one splits it into the part that is tax free because you already paid it in, the part that is taxable, and the amount that actually reaches your account.
Informational only — not professional advice. This is a tax computation, not tax advice, and it uses tax rates you supply rather than working out your bracket, your filing status or your state’s treatment of federal pensions. Your Form CSA 1099-R from OPM is the authoritative statement of what is taxable. FedAnnuity is not affiliated with OPM, the IRS or the U.S. government.
$51.61 of your $2,375 monthly annuity is a tax-free return of the money you already paid in, so $2,323 of it — 97.8% — is taxable income. After tax and premiums, $1,746 reaches your account each month.
IRS simplified method · one-life table · 310 anticipated payments
| Gross monthly annuityBefore anything is taken out | $2,375.00 |
|---|---|
| Tax-free part$16,000 of contributions ÷ 310 payments | $51.61 |
| Taxable partWhat your tax rate is actually applied to | $2,323.39 |
| Federal tax withheld12% of the taxable part, not of the gross | − $278.81 |
| FEHB and FEGLI premiumsAfter-tax in retirement — no premium conversion | − $350.00 |
| Net monthly paymentWhat arrives in your account | $1,746.19 |
| Anticipated paymentsOne-life table, read on age 60 at the starting date | 310 |
|---|---|
| Already recovered0 payments received | $0 |
| Still to be recovered310 more payments, 25 years and 10 months | $16,000 |
| Taxable share in 10 yearsSame fixed exclusion against an annuity adjusted at 2.0% a year | 98.2% |
Applying your rate to the whole annuity overstates the tax by $6.19 a month. That is $74 a year of tax you do not owe, and it is the most common error in a net-pay estimate: the rate belongs on the taxable part, which is $2,323, not on $2,375.
The tax-free part is fixed for life at $51.61, so every cost-of-living increase is fully taxable and the taxable share climbs each year — the COLA calculator shows what those increases look like. If you elect a survivor annuity, the exclusion continues to your spouse until the whole cost has been recovered; the survivor benefits calculator prices the election itself.
How this is calculated
You paid for part of your own annuity. Every pay period of your career, a percentage of your basic pay was withheld for retirement and you were taxed on it then. The tax code does not tax that money twice: a portion of each monthly annuity payment is treated as a return of what you already paid, and only the rest is income. The whole question is how that portion is worked out — and the answer is a division, not a percentage.
The simplified method
26 U.S.C. § 72(d)(1)(B) recovers your investment in the contract “ratably over the anticipated number of payments”. For a federal annuity that reduces to one line:
monthly tax-free amount = total contributions ÷ anticipated payments
Your total contributions — the cost in the plan — is every dollar withheld from your pay for CSRS or FERS across your whole career, plus any deposit or redeposit you paid to make earlier service count. OPM prints it on your annuity statement and in box 9b of Form CSA 1099-R. The military service deposit and any civilian deposit or redeposit you paid are part of it, which is a small consolation prize for those payments: they come back to you tax free.
The divisor is your age, and it is a cliff
The anticipated number of payments is not a life expectancy calculated for you. It is read from a table on your age at the annuity starting date, and it never moves again:
| 55 or under | 360 payments |
|---|---|
| 56–60 | 310 payments |
| 61–65 | 260 payments |
| 66–70 | 210 payments |
| 71 and over | 160 payments |
Because the bands are brackets rather than a slope, one year of age can change the divisor outright. Retiring at 60 gives 310 anticipated payments and retiring at 61 gives 260 — the same total contributions returned in larger monthly pieces over a shorter run. Nothing about the annuity changes; only the shape of the tax-free part does.
A survivor election moves you to the other table
If a survivor annuity is payable, the annuity is paid over two lives, and § 72(d)(1)(B)(iv) reads the divisor from a second table on your two ages added together — for annuity starting dates after 1997:
| 110 or under | 410 payments |
|---|---|
| 111–120 | 360 payments |
| 121–130 | 310 payments |
| 131–140 | 260 payments |
| 141 and over | 210 payments |
The two-life numbers are larger, so electing a survivor annuity lowers the monthly tax-free amount and raises the taxable part today. A retiree of 60 with a spouse of 58 divides by 360 rather than 310. What is bought with that is continuity: if you die first, your survivor goes on excluding the same monthly amount until the cost has been recovered between the two of you. The election itself — the reduction to your own annuity and what it pays your spouse — is priced by the survivor benefits calculator.
Why FERS retirees exclude so little
The exclusion returns what you put in, so the size of it is decided by the contribution rate you paid for thirty years, not by the tax rules. A FERS employee contributes 0.8% of basic pay — 3.1% for those first hired in 2013 and 4.4% for 2014 onward — against 7% for CSRS. A FERS career therefore arrives at retirement with a cost in the plan measured in the tens of thousands, and dividing that by 310 months leaves a tax-free part of a few tens of dollars. The example this page opens on is typical: over 97% of the annuity is taxable. A CSRS annuity computed the same way excludes several times as much, from a far larger cost.
The exclusion is a fixed dollar amount, so it erodes
Publication 721 is explicit: “The tax-free part is a fixed dollar amount. It remains the same, even if your annuity is increased.” Every cost-of-living adjustment lands entirely in the taxable column, so the taxable share climbs a little each year for the rest of your life. Two rules then end it altogether:
- Recovery. § 72(b)(2) caps the total excluded at your cost. Once the anticipated payments have been made, the whole annuity is taxable — about 21 years and 8 months in at 260 payments. Nothing about the payment changes on that day; only the tax on it does.
- Death before recovery. § 72(b)(3) allows the unrecovered part of the cost as a deduction on the final return of whoever was receiving the annuity. It is not simply lost, but somebody has to claim it.
What comes out before you are paid
Withholding is applied to the taxable part, not to the gross annuity. Applying a marginal rate to the whole payment is the most common error in a net-pay estimate, and the tool prices what it costs you in the panel above. Two further deductions are usually larger than people expect:
- FEHB premiums are after-tax in retirement. As an employee your share was taken through premium conversion, before tax. Annuitants are not eligible for premium conversion, so the same premium now comes out of after-tax money and no longer reduces your taxable income. The premium did not rise; the cost of it did.
- FEGLI premiums continue and change with age. Basic coverage keeps being withheld into retirement unless you elect the 75% reduction, at which point it becomes free at 65. Optional coverage is priced in five-year age bands and gets steeply more expensive late.
What this does not model
- Your tax bracket, filing status or credits. The tool multiplies the taxable part by a rate you type in. It does not run the tax tables, does not know your other income, and does not compute what OPM will withhold from your Form W-4P election.
- State treatment. Some states exempt federal annuities in full, some tax them in full, and several exempt an amount that varies with age or income. This is deliberately an editable rate rather than a fifty-state table baked in and left to go stale.
- The FERS annuity supplement. It is paid alongside the annuity until 62 and is taxable, but it is not part of the annuity the exclusion is computed against. Enter your basic annuity here and price the supplement with its own calculator.
- The alternative annuity and deemed deposits. A retiree who elects the alternative form of annuity has a lump-sum credit paid out and a cost figure adjusted for deemed deposits and redeposits. That is a different worksheet, and Publication 721 covers it.
- An annuity apportioned to a former spouse. A court-ordered apportionment splits both the payment and the cost recovery, and each party receives a separate 1099-R.
- Annuity starting dates before 1998. Older starting dates use different tables, and dates before 1 July 1986 may use the general rule rather than the simplified method entirely.
- Medicare, TSP withdrawals and Social Security. Medicare Part B is not withheld from an OPM annuity, TSP withdrawals are taxed on their own rules, and how much of your Social Security is taxable depends on the total of everything else. None of them are in this figure.
- Interim payments. OPM pays a reduced interim annuity while a claim is adjudicated, usually with no tax-free portion applied at all, and reconciles it afterwards. It delays money rather than changing the totals here.
Sources
- IRS Publication 721 — Tax Guide to U.S. Civil Service Retirement Benefits — the simplified method worksheet, both tables of anticipated payments, the statement that the tax-free part is a fixed dollar amount, and OPM-specific handling of the cost in the plan.
- 26 U.S.C. § 72 — the statute behind it: the exclusion ratio in (b), the cap at the unrecovered investment in (b)(2), the deduction for an unrecovered cost at death in (b)(3), and the simplified method with both tables in (d)(1)(B).
- OPM CSRS/FERS Handbook, Chapter 70 — Taxation of Annuity — OPM’s own account of how it computes and reports the taxable portion, including interim payments and apportioned annuities.
- OPM — FEHB premiums — the annuitant premium tables, and the rule that annuitants pay their share with after-tax dollars because premium conversion is not available to them.
Last reviewed: August 2026
Frequently asked questions
How much of my federal annuity is taxable?
Most of it. Part of every payment is a tax-free return of the retirement contributions withheld from your pay over your career, and the rest is ordinary income. The tax-free part is worked out by the simplified method in 26 U.S.C. § 72(d)(1)(B): your total contributions divided by a fixed number of anticipated payments read from an IRS table on your age when the annuity starts — 310 payments at 57, 260 at 61. A career of contributions divided by that many months is usually a modest monthly figure, which is why a typical FERS annuity comes out well above 90% taxable.
Why is so little of a FERS annuity tax free when CSRS retirees exclude more?
Because the exclusion returns what you paid in, and the two systems charge very different amounts. A FERS employee contributes 0.8% of basic pay (4.4% for anyone first hired in 2014 or later); a CSRS employee contributes 7%. The larger CSRS contribution buys a larger cost in the plan, and dividing a larger cost by the same number of anticipated payments gives a larger tax-free slice of each month's payment. Nothing about the tax rule differs between the two systems — only the amount that went in.
Does the tax-free part go up with my COLA?
No, and this is the detail that surprises people most. IRS Publication 721 states that the tax-free part is a fixed dollar amount that remains the same even if your annuity is increased. Every cost-of-living adjustment is therefore fully taxable, so the taxable share of your annuity rises a little every year of retirement, and the real value of the exclusion falls the whole time.
What happens once I have recovered all my contributions?
The exclusion stops and the whole annuity becomes taxable — 26 U.S.C. § 72(b)(2) caps the total excluded at your cost. At 260 anticipated payments that is a little under 22 years on the roll. If you die before recovering the full cost, § 72(b)(3) allows the unrecovered amount as a deduction on your final return; and where you elected a survivor annuity, your survivor continues excluding the same monthly amount until the cost is recovered between you.
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