Is the VRS pension benefit taxable?
The VRS benefit is subject to federal income tax and, if the retiree resides in Virginia, to State income tax. The amount of tax due is based on total taxable income and the number of deductions claimed. However, if the retiree paid his member contribution on an after-tax basis, a certain portion of each pension check is excluded from State and federal income tax. In the event that a retiree lives longer than the life expectancy used in Internal Revenue Service regulations, the entire benefit is again taxable.
