Question: Erek is a retired public safety officer. He separated from service due to disability. He wants to take out $3,000 tax-free from his retirement plan to pay for his Medicare premium. Is he allowed to do so?
Answer: No. If Erek withdrew the funds from his retirement plan to pay for his Medicare, it would be taxable to him.
To begin, who is a retired public safety officer? They are law enforcement officers, firefighters, chaplains or members of a rescue squad or ambulance crew who separated from service as a public safety officer with the employer who maintains the retirement plan for them after reaching the normal retirement age. They could also be an officer who separated from service because of disability.
The IRS says retired public safety officers can reduce their taxable income by excluding up to $3,000 from their retirement plan distribution to pay for qualified insurance premiums like accident or health insurance or long-term care insurance. However, it does not include Medicare, which is under title XVIII of the Social Security Act.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.