First-year rules


Q. I’ve heard there is some sort of tax break (deduction/credit?) that may be claimed if you earned less in your first year of CSRS retirement than you earned while working. Is this true?  Local tax filers are unfamiliar with this, but then there are few federal retirees in my area. How do you claim this? Any specific tax form, etc., to use? I retired in June 2011. Would I claim it on 2011 tax year (half-year retired) or 2012 (first full year in retirement)?

A. While there is no such tax break for either CSRS or FERS employees, there is a “first year rule” that applies to the Social Security benefit or special retirement supplement. It applies to employees who retire midyear with an entitlement to one of those benefits and have already earned more than the annual Social Security earnings limit. It protects them against having their Social Security benefits reduced. You can read more about it at Just scroll down to “Special rule for the first year you retire.”


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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to

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