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I have a question concerning building up a big chunk of A/L to get a nice payout when you retire. If I retire December 31th, this year with over 400 hours A/L, is the payout considered income for this year, or next year? I ask for tax planning purposes. Also, I want to avoid pushing my wife's Medicare into the next bracket.
If you retire Dec 31 you would not get the payout until January at the earliest and it would be considered taxable income in 2022. If you retired Nov 30 you might get it in December and then it would be taxable income in 2021. My understanding is it comes pretty much in the form of a paycheck and is taxed as such. Retirees may be able to shed some more light for you. Good Luck and Congrats!
Congrats on the up coming retirement. Hopefully I will be in your shoes in a few years.Quote:
Originally Posted by Wildzeke
To piggy back on your the question asked, Does anyone know what is figured in when calculating selling back A/L. I understand taxes etc are taken out but is Locality pay part of the calculation? Is it safe to simply use the hourly rate on you pay stub? Thanks
Agree with papahotel, It will be considered taxable income for the year in which you receive it. It does not count as earned income for tax purposes.
That will ballpark it. Any hours earned in the pay period of a year which results in a raise will accrue the higher amount. That means any hours earned in the first PP of the next year (usually late December) will accrue at whatever the yearly pay raise is. Locality pay also counts.Quote:
Originally Posted by quabit
It does count as earned income for tax purposes as it is reported on a W-2
Quote:
Originally Posted by Bullitt
I was wrong and Evilanne is correct. The lump sum is earned income and will have Social Security and Medicare withheld. Thought it had the same tax considerations as FERS pension. :embarrest: