Line 5a on IRS Form 1040 is for the total amount of pension and annuity payments you received during the tax year. That figure is determined based on the amounts given in box 1 of any Forms 1099-R you received from financial service providers.
If your pension and annuity payments were fully taxable, you should leave line 5a blank and enter the total amount of those payments on line 5b, for the taxable amount, instead.
Learn more about what kinds of payments should be included on line 5a and how to determine the taxable amount of partially taxable pensions and annuities.
For tax years prior to 2020, lines 4c and 4d were used rather than lines 5a and 5b.
What Is Line 5a on Form 1040?
Pension and annuity payments entered on line 5a may include distributions from 401(k), 403(b), and 457(b) plans.
- A 401(k) plan is a retirement savings plan available at many for-profit companies.
- A 403(b) plan is a retirement savings plan for religious leaders and many public school employees as well as those who work for nonprofit organizations.
- A 457(b) plan is for local and state government employees as well as highly compensated employees at tax-exempt organizations, including charities, non-profit hospitals, and unions.
There are four main categories of annuity from which someone might receive payments:
- Fixed-period: This type of annuity pays regular, set amounts of money over a pre-determined length of time.
- Single-life: This annuity also makes regular, set payments, but they end with the recipient's death.
- Joint and survivor: After the first recipient of this type of annuity dies, their survivor continues to receive payments, which may be of the same or a different amount.
- Variable: The payments from this type of annuity vary depending on factors such as the profit made on the annuity funds or a cost-of-living index.
An employer may purchase an annuity for its employees in lieu of other retirement savings plans.
Federal Distribution Payments and Foreign Pension Payments
Distributions from the Federal Employees' Retirement System or its predecessor, the Civil Service Retirement System, and the Thrift Savings Plan—which is the equivalent of a 401(k) for federal workers—would also be entered on line 5a, as would money from a foreign pension plan.
For the 2020 tax year, line 4a is for total IRA distributions, and line 4b is for the taxable amount of those distributions.
Who Uses Line 5a on Form 1040?
Anyone who has received pension or annuity payments that are not fully taxable in the tax year would use line 5a on Form 1040. You should have received a 1099-R from all of the firms managing those retirement accounts.
Using Form 1040-SR
Total pension and annuity payments are also reported on line 5a of Form 1040-SR, the income tax return designed for taxpayers 65 and older. Likewise, taxable pension and annuity payments are reported on line 5b. Form 1040-SR uses larger print than the standard 1040, and it has a standard deduction chart that is easier to read and use.
Using Form 1040-NR
In previous years, filers of Form 1040-NR for U.S. nonresidents would use line 17a to report total pension and annuity income and line 17b to report taxable pension and annuity income. However, the form was redesigned for tax year 2020, so these filers will now use lines 5a and 5b as well.
The following types of retirement income should be reported on line 1 of Form 1040 rather than on line 5a:
- Corrective distributions of excess salary deferrals or other excess contributions to retirement plans
- Payments from disability pensions received before you've reached the minimum age for retirement benefits as set by your employer
Taxation of Pension and Annuity Payments
The IRS considers your payments to be fully taxable if you didn't contribute anything to your pension or annuity or you received all your cost back tax-free in a prior year. Military retirement payments shown on a Form 1099-R are also considered to be fully taxable.
For information on military disability pensions, see IRS Publication 525, Taxable and Nontaxable Income. For information on U.S. Railroad Retirement Board payments, see IRS Publication 575, Pension and Annuity Income.
If your Form or Forms 1099-R show the taxable portion of your pension and/or annuity payments, enter the total amount on Line 5b. If the taxable portion isn't given, you must calculate it using either the General Rule, which is explained in IRS Publication 939, General Rule for Pensions and Annuities, or the Simplified Method.
Calculate Using the Simplified Method
You must use the Simplified Method if your annuity starting date was after July 1, 1986, and you used the Simplified Method in the prior tax year or your annuity starting date was after November 18, 1996, and both of the following apply:
- The payments are from a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity.
- On your annuity starting date, either you were under age 75 or the number of years of guaranteed payments was fewer than five.
Your annuity's starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed.
Your annuity provides guaranteed payments if a minimum number of payments or a minimum amount is payable even if you and any survivor don't live to receive the minimum. If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first five years after payments begin, you are entitled to less than five years of guaranteed payments.
The IRS will calculate the taxable portion of your pension and annuity payments for a $1,000 fee.
The Simplified Method Worksheet is on page 27 of the Instructions for Form 1040 and 1040-SR. If you received payments from more than one partially taxable pension or annuity, calculate the taxable amount of each one separately and then report the total on line 4d.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.
- Line 5a on Form 1040 or 1040-SR is for the total amount of pension and annuity payments you received.
- You calculate that figure by adding up the amounts in box 1 of any Forms 1099-R you received from financial service providers.
- If your pension and annuity payments were fully taxable, leave line 5a blank and enter the total amount of those payments on line 5b instead.
- If the payments weren't fully taxable and the taxable portion isn't given on a Form 1099-R, you must calculate it using either the General Rule or the Simplified Method.
- For tax years prior to 2020, lines 4c and 4d were used rather than lines 5a and 5b.
Frequently Asked Questions (FAQs)
What are pensions and annuities?
Pensions and annuities are investment vehicles that you can use to generate a fixed income stream. Pensions are retirement savings funds offered by employers, while annuities are actually an insurance product and aren't necessarily tied to retirement. Both are common sources of steady income later in life.
How much is the income tax on pensions and annuities?
When you receive payments from an annuity or pension, you'll pay income tax on any portion of the payment that wasn't originally taxed when you made your contributions. That means any employer contributions or money that's a result of account growth will be taxed at your income tax rate at the time of withdrawal. Typically, this amount will be automatically withheld from your payments.
How do I report income from foreign pensions on Form 1040?
Foreign pension money does not get reported with your regular U.S.-based annuity and pension income. IRS rules for reporting income from foreign retirement accounts are fairly complicated, and there are several forms you may need to file with your tax return, depending on the type of account. Consult with a tax advisor if you're receiving foreign pension money.