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Desktop: Retired Public Safety Officer Pension Exclusion

When the taxpayer is an eligible "retired public safety officer", defined by the IRS as a "law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew", they can elect to exclude up to $3,000 of the distributions they receive from an eligible retirement plan from their taxable income.

To be eligible for this exclusion, the funds must be used to pay for accident or health insurance premiums or the premiums associated with a long-term care contract for the taxpayer, their spouse, or their dependents.

Important points:

  • The taxpayer retired either because of a disability or they reached their normal retirement age.
  • The retirement plan must be a governmental plan that is a qualified trust or a section 403(a), 403(b), or 457(b) plan.
  • The distribution must be from a retirement plan maintained by the employer from which the taxpayer retired as a public safety officer and cannot be from some other retirement plan.
  • The distribution must be made directly from the plan to the provider of the accident or health plan or long-term care insurance contract. 
  • The election can only be made for amounts that would otherwise be included in income.

The amount excluded from income is the smaller of the amount of the premiums or $3,000.

Click the tax year below for details on how to enter the PSO exclusion in TaxSlayer Pro.

2017 and forward

For tax years 2017 and forward, from the Main Menu of the Tax Return (Form 1040) select:

  • Income
  • IRA/Pension Distributions - Select New and enter the Payer's Information.
  • Enter the Gross Distribution in Box 1 and the Taxable Amount in Box 2a as shown on Form 1099-R.
  • Enter the Distribution Code in Box 7. (If the distribution code is 3 and the taxpayer hasn't yet reached minimum retirement age as set by their employer, answer Yes to the question about reporting this distribution on Form 1040 Line 1.)
  • In Box j Public Safety Officer, enter the smaller of the amount of the premiums or $3,000.

The printed Form 1040 will print the line number along with the letters "PSO" on the first page, indicating why there is a difference in the gross and taxable amount of the distribution.

2016 and prior

For tax year 2016 and prior, from the Main Menu of the Tax Return (Form 1040) select:

  • Income
  • IRA/Pension Distributions - Select New and enter the Payer's Information.
  • Enter the Gross Distribution in Box 1 as shown on Form 1099-R.
  • Reduce the Taxable Distribution in Box 2a by the smaller of the amount of the premiums or $3000.
  • Enter the Distribution Code in Box 7.
  • Exit the Form 1099-R entry window and click the Other / Roth button.
  • Select Public Safety Officers Insurance Distribution, then answer YES to the question.
  • Select either Form 1040 Line 16 or Form 1040 Line 7. This selection should match the line of the 1040 that the 1099-R income is being reported on, usually line 16. (If the distribution code is 3 and the taxpayer hasn't yet reached minimum retirement age as set by their employer, select Line 7 and enter the amount being excluded.)

The printed Form 1040 will show the letters "PSO" on the same line where the exclusion is being taken, indicating why there is a difference in the gross and taxable amount of the distribution.

Note: This is a guide on entering Public Safety Officer Distributions into the TaxSlayer Pro program. This is not intended as tax advice.

Additional Information

Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits

Form 1040 Instructions