Most pensions are fully taxable. Some are partially taxable if you had a cost basis, i.e., you contributed to the pension. In a few unique situations, pensions may be tax-free. This is the case when they come from the Veterans Administration or when they involve disability payments for public safety officers and firefighters.
You should receive a Form 1099-R from the pension-plan administrator. Box 2a of this form usually tells you how much of the payment is taxable. See the instructions for IRS Form 1040 or 1040A, and also see IRS Publication 575, Pensions and Annuities, for more information.
Article is closed for comments.