Buyout and taxes


Q. I have more than 24 years’ federal service, am 65 and recently was offered a $20,000 buyout. When I received the printout for the buyout, it showed I had two exemptions not considered or computed for the federal tax and I was charged the full 25 percent federal tax, $5,000. The normal state tax with two exemptions, along with Social Security and Medicare, were taken out at the usual rate with two exemptions. Should my two exemptions have been figured into and deducted from the deduction?

A. The 25 percent federal tax deduction is automatic and is taken from every buyout payment.


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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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