If you're a retired public safety officer and qualify for the Public Safety Officer (PSO) Exclusion, you can enter the exclusion amount when reporting your Form 1099-R. This exclusion may allow you to reduce the taxable portion of certain retirement distributions used to pay eligible insurance premiums.
How do I enter the Public Safety Officer Exclusion?
Follow these steps in your account:
- Go to Federal.
- Select Income (Select My Forms).
- Choose 1099-R, RRB, SSA.
- Select Add or Edit next to your Form 1099-R.
- Enter the information from your Form 1099-R.
- For Box 2a, select Click here for options.
- Choose Public Safety Officer Distribution.
- Enter the smaller of:
- Your qualifying insurance premiums paid directly from the retirement plan, or
- $3,000.
If you qualify, the abbreviation PSO will appear near the bottom of Form 1040, indicating the exclusion has been applied.
Who qualifies for the Public Safety Officer Exclusion?
You may qualify if you're a retired public safety officer and your retirement plan made direct payments for eligible insurance coverage.
Examples of qualifying public safety officers include:
- Law enforcement officers
- Firefighters
- Chaplains
- Members of rescue squads
- Members of ambulance crews
To qualify for the exclusion:
- Insurance premiums can cover you, your spouse, or your dependents.
- The retirement plan must pay the insurance provider directly.
- The maximum exclusion is the lesser of the premiums paid or $3,000.
- Only amounts that would otherwise be taxable can be excluded from income.
- Any premiums excluded under this provision cannot also be claimed as a medical expense deduction.
What types of insurance premiums qualify?
Eligible premiums include:
- Accident and health insurance
- Long-term care insurance
These premiums must be paid directly from an eligible retirement plan to the insurance company.
What retirement plans are eligible?
The exclusion applies to distributions from governmental retirement plans, including:
- A qualified trust
- A Section 403(a) plan
- A Section 403(b) annuity
- A Section 457(b) plan
Important reminder
The Public Safety Officer Exclusion is an income exclusion, not a tax credit. It reduces the amount of retirement income subject to tax when all eligibility requirements are met. Be sure to keep documentation showing that the insurance premiums were paid directly from the retirement plan to the insurance provider.