How to Figure a Federal Tax Deduction From a NYS Pension

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If you receive a pension from New York State, you have a few options for figuring the amount of federal income tax deducted from your checks. You'll file Form W-4P with the state to indicate the federal tax withholding option you choose. One of the unique choices you have is to select the amount of federal tax you want deducted from your state retirement check; however, you'll want to make sure the deduction is sufficient enough to offset potential income tax liability. New York does not count your state retirement money as taxable income, but the IRS does.

  • Prepare state Form W-4P (see Resources). Include the last four digits of your Social Security Number, your New York State, Local Retirement System registration number and your address.

  • Indicate your preference for the deduction of federal income tax. You can request that the state calculate your deduction based on the amount of your monthly benefit or you can request that the state only withhold a fixed amount that you determine. Use the online New York State Local Retirement System calculator to determine the amount that is generally required to be withheld (see Resources). You can also request the state to deduct zero tax, but this could cause you to owe federal taxes at year's end.

  • Sign Form W-4P and mail to:

    New York State and Local Retirement System

    Attn: Tax Unit, Mail Drop 4-2

    110 State Street

    Albany, NY 12244

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