Federal income tax
Service retirement benefits are federally taxable from the first payment; the part representing previously taxed contributions (before July 1, 1989, or after-tax purchases) is excluded under the IRS Simplified General Rule until recovered. Handbook p. 72, Federal Income Taxes on Service Retirement Benefits
Missouri income tax
What the handbook says: For Missouri residents, the part of the benefit subject to federal tax is also subject to Missouri income tax, with certain exemptions. PSRS can't withhold for other states. Handbook p. 73, State Income Taxes
The public pension exemption: Recipients may be able to deduct up to 100% of PSRS benefits on the Missouri return, limited to the maximum Social Security benefit per person; since tax year 2024 it's no longer limited by filing status or Missouri AGI. Eligibility depends on several factors (see dor.mo.gov). Handbook p. 73, Missouri Public Pension Exemption; psrs-peers.org, Missouri Public Pension Exemption
Where the sources disagree
The handbook is PSRS's current guidance to members, and it treats the benefit as subject to Missouri tax with exemptions. Section 169.587 reads as a full exemption, and points to the pension sections of Missouri's income tax law (143.123-143.124). The handbook itself says the law prevails where the two differ. We repeat the handbook's guidance, but we can't settle which reading the Department of Revenue applies to you. Handbook p. 14, Law Governing PSRS; inside cover, Legal Disclaimer
The PSRS handbook says your benefit is subject to Missouri income tax, with exemptions. But RSMo 169.587 says Chapter 169 benefits are exempt from any Missouri tax. PSRS also doesn't give a dollar figure for the public pension exemption cap.
What we use: what the handbook says. Check with the Missouri Department of Revenue for your own return.
Lump sums
- PLSO: Most or all of a PLSO is taxable in the year paid unless rolled over; PSRS must withhold 20% federal tax on the taxable portion not rolled over; a 10% penalty may apply before 59 1/2 unless you separate from service in or after the year you reach 55. Funds credited before January 1, 1987 that were previously taxed are non-taxable. Handbook pp. 73-74, Income Taxes on the Partial Lump Sum Option; PLSO brochure p. 3
- Refunds: 20% federal withholding on the taxable portion (if $200 or more) unless directly rolled over; a 10% penalty may apply before 59 1/2 (generally not if you separate in or after the year you reach 55). Contributions before July 1, 1989 aren't taxable. Handbook p. 25, Income Taxes on Refunds
- $5,000 death benefit: taxable, and it can be rolled over. Handbook p. 60, $5,000 Death Benefit; p. 74, Income Taxes on the $5,000 Death Benefit; RSMo 169.070.21
What the handbook says
- PSRS benefits are subject to federal income tax. A small part may be tax-free if you made contributions before July 1989 or bought service with after-tax money.Handbook p. 72, Federal Income Taxes on Service Retirement Benefits
- If you live in Missouri, the federally taxable part is also subject to Missouri income tax, with certain exemptions. PSRS can't withhold tax for other states.Handbook p. 73, State Income Taxes
- Check with PSRSMissouri's public pension exemption may let you deduct up to 100% of your PSRS benefit, up to the maximum Social Security benefit. Since tax year 2024 it no longer depends on filing status or income. Check dor.mo.gov to see if you qualify.Handbook p. 73, Missouri Public Pension ExemptionThe dollar cap isn't in PSRS sources, and RSMo 169.587 (exempt from any Missouri tax) conflicts with the handbook.
Questions
Is my PSRS benefit taxed?
Yes, by the federal government, from the first payment. A small part may be tax-free if you paid in after-tax money.
Does Missouri tax PSRS benefits?
PSRS's handbook says the federally taxable part is subject to Missouri income tax, with exemptions such as the public pension exemption. A Missouri law in the retirement chapter reads differently. See below, and ask a tax adviser.
Can PSRS withhold tax for another state?
No.
Source: PSRS Member Handbook, 2026-2027 (as of September 2026), pp. 25, 60, 72, 73, 74; PLSO brochure p. 3; RSMo 169.070, 169.587; psrs-peers.org pages. Last reviewed .