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How to Handle Retirement Income on Your Tax Return. By: Aaron Steele

aaron steele
September 15, 2021

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In this article, we shall answer an important question: How can an employee handle retirement income on their tax return? Let us look at the problem in detail and try to answer the query.

Let’s say a client has a $21,105 taxable interest income before taking personal exemptions and $3,862 in pension income. He is 72 years old and getting Social Security retirement benefits. He is not including the $3,862 on Line28a. For Line 28b, “Other Retirement Income Exclusion.” Want to know the rule for that? According to Worksheet D, $60,000 is the exemption amount. Can he put the difference on that line, which would make any extra income down to zero? Is that right?

— question raised by the taxpayer

Our answer to the taxpayer based on the information given is: it sounds right.

The Other Retirement Income Exclusion (ORIE) amount is used by taxpayers who fail to use their entire pension exclusion from Worksheet D ultimately.

Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton, said a person is eligible for the Other Retirement Income Exclusion just like the pension exclusion, with additional criteria for the ORIE if you or your spouse are not earning income from any job, partnership income, any income from a trade or business or S Corporation income exceeding $3,000 for the year, or income except that who otherwise would qualify for the ORIE amount.

He answered this because the client did not mention any income from partnerships, S Corps, or any other source, so the taxpayer raising this question can include $21,105 of taxable interest income as part of the ORIE.[/vc_column_text][/vc_column][/vc_row]

Aaron Steele

After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.