Taxes on your Minnesota TRA pension

Federal tax

TRA benefits are federal taxable income except the part representing your after-tax cost (contributions through Dec. 31, 1982 and direct payments such as out-of-state, military, leave, shortage and refund-repayment purchases). Benefits effective Nov. 18, 1996 or later use the IRS Simplified Method. TRA Handbook (2022), p. 22, Federal income tax

Minnesota tax

Minnesota taxes the benefit the same way, excluding the same cost basis by the Simplified Method. Non-Minnesota residents are not subject to Minnesota income tax on it. TRA withholds only federal and Minnesota tax. TRA Handbook (2022), p. 22, Minnesota income tax

The Qualified Public Pension Subtraction

Minnesota's Qualified Public Pension Subtraction (Schedule M1QPEN) is for pension payments not based on service that also earned Social Security. TRA basic members qualify; coordinated members do not unless they were converted from basic to coordinated (TRA's general conversion date is January 1, 1960). A coordinated member may be eligible for the Social Security Subtraction on Schedule M1M instead. Minnesota Dept. of Revenue, 2025 Schedule M1QPEN and instructions, pp. 1-3

It shrinks by 10% for each $2,000 of income over the start. This matters to TRA basic members and converted members; most Coordinated members don't qualify.

The sources gathered only point coordinated members to the Social Security Subtraction on Schedule M1M; they give no amounts for it. Minnesota Dept. of Revenue, 2025 Schedule M1QPEN instructions, p. 2, Coordinated member

The details

• TRA benefits are taxable federal and Minnesota income, except the part that returns your after-tax contributions (figured with the IRS Simplified Method).TRA Handbook (2022), p. 22, Income taxes on benefits
• If you don't live in Minnesota, Minnesota doesn't tax your TRA benefit; your own state may. TRA withholds only federal and Minnesota tax.TRA Handbook (2022), p. 22, Minnesota income tax
• Minnesota's Qualified Public Pension Subtraction is for pensions from work that didn't also earn Social Security. Coordinated TRA members don't qualify unless they were converted from basic membership (TRA's general conversion date is Jan. 1, 1960); they may be eligible for the Social Security Subtraction on Schedule M1M instead.Minnesota Dept. of Revenue, 2025 Schedule M1QPEN instructions, p. 2
• For 2025 the public pension subtraction is up to $13,540 ($27,080 married filing jointly), phasing out above $84,490 AGI ($108,320 joint).Minnesota Dept. of Revenue, 2025 Schedule M1QPEN, p. 1
• Minnesota TRA handles federal and Minnesota withholding only, not any other state's. Change it in myTRA, or send Form W-4P (federal) or W-4MNP (Minnesota) through the myTRA Document Upload Portal or by mail. Lump sums and rollovers use Form W-4R.minnesotatra.org, Taxes, Tax withholding overview
• If you have more than one payee account (for example TRA, Duluth Teachers, Minneapolis Teachers, a survivor or disability account), write on each withholding form which account it's for, or that it applies to all.minnesotatra.org, Taxes, Tax withholding overview
• Your 1099-R tax form is in myTRA. Minnesota TRA staff can't give tax advice.minnesotatra.org, Taxes, Tax withholding overview
• Under the Simplified Method your age and plan choice set the tax-free part of each payment. Once your whole after-tax cost has come back, every later payment and every postretirement increase is fully taxable.TRA Handbook (2022), p. 22, Federal income tax

This is general information from Minnesota TRA and the Minnesota Department of Revenue, not tax advice.

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