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Last Updated: 12/27/2016

Railroad Retirement Board Benefits Subtraction

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Minnesota does not tax benefits you receive from the Railroad Retirement Board for unemployment, sick pay or retirement. If any of these benefits were taxed on your federal return, you may subtract them from taxable income on your Minnesota return as outlined below.

Tier 1 and Tier 2 Benefits

Railroad Retirement Board benefits are divided into two categories; Tier 1 (Social Security equivalent) and Tier 2 (pension).
 
Tier 1 benefits are reported to you on a RRB-1099 form, similar to the Social Security Administration’s SSA-1099. Tier 1 benefits are subject to federal tax under the Social Security benefit rules, but depending on your income level they may not be taxed on your federal return.
 
Tier 2 benefits are traditional pension benefits and are reported to taxpayers on a RRB-1099R form. At least a portion of these benefits is taxable at the federal level under the federal pension and annuity rules.
 

Claiming the subtraction

Minnesota does not tax either Tier 1 or Tier 2 benefits. If your federal adjusted gross income includes Railroad Retirement Board income, you can subtract it when determining your Minnesota taxable income.
 

To claim this subtraction:

Note: A pension you receive directly from a railroad company does not qualify for this subtraction.

For more information, see Fact Sheet 6, Seniors.