Introduction

This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. It is prepared through the joint efforts of the Internal Revenue Service, the Social Security Administration (SSA), and the U.S. Railroad Retirement Board (RRB).

Social security benefits include monthly survivor and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable.

Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits.

If you received these benefits during 2001, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board, (Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Payments by the Railroad Retirement Board, if you are a nonresident alien) showing the amount.

Note. When the term "benefits" is used in this publication, it applies to both social security benefits and equivalent tier 1 railroad retirement benefits.

Legislation in 2000 removed the "earnings test" for social security recipients who work and are ages 65 through 70. This change has no effect on the federal income tax rules for social security benefits.

What is covered in this publication. This publication covers the following topics:

• Whether any of your benefits are taxable,
• How much is taxable,
• How to report taxable benefits,
• How to treat lump-sum benefit payments, and
• Deductions related to your benefits, including a deduction you can claim if your repayments are more than your gross benefits.

The Appendix at the end of this publication explains items shown on your Forms SSA-1099, SSA-1042S, RRB-1099, or RRB-1042S.

What is not covered in this publication. This publication does not cover the tax rules for the following railroad retirement benefits:

• Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits,
• Tier 2 benefits,
• Vested dual benefits, and
• Supplemental annuity benefits.

For information on these taxable pension benefits, see Publication 575, Pension and Annuity Income.

This publication also does not cover the tax rules for foreign social security or railroad retirement benefits. These benefits are taxable as annuities, unless they are exempt from U.S. tax under a treaty.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

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Internal Revenue Service
Technical Publications Branch
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