STRS Ohio Retirement Tax Withholding

Federal Tax on Your Monthly Pension

STRS Ohio pension benefits are generally subject to federal income tax. If you paid tax on some of your contributions, a portion of your benefit is tax-free until those contributions are recovered. STRS Ohio reports the taxable amount on your Form 1099-R after your retirement account is finalized.

When you file your retirement application, you select your federal tax withholding rate through STRS Ohio's online portal. This works like the W-4 you filled out as an employee — you choose a filing status and can request additional withholding if you want to avoid a tax bill in April. You can adjust your withholding election at any time after retirement through your Online Personal Account.

Getting the withholding right matters more than most retirees realize. Your pension replaces a teaching salary, but the tax math changes. You no longer have payroll deductions for STRS contributions (14% of salary), union dues, or classroom expenses. Your effective tax rate on pension income may be higher than what you paid as a working teacher, depending on your total household income.

Ohio State Income Tax

The taxable portion of STRS Ohio pension income is subject to Ohio income tax for Ohio residents. STRS will withhold Ohio state taxes from your monthly benefit on request. For 2026, Ohio requires estimated payments when your estimated tax liability (total tax minus credits), less Ohio withholding, is more than $500.

STRS Ohio does not withhold state taxes for residents of other states. If you retire to Florida, Texas, or another state without income tax, your state tax obligation drops to zero. If you move to a state that taxes pension income — Pennsylvania exempts it, but many states do not — you handle that withholding or estimated payment on your own.

Ohio offers a retirement income credit and a senior citizen credit that can reduce your state tax liability. A tax professional can model your specific situation to determine whether itemizing these credits changes your effective state tax rate.

PLOP Tax Treatment

The tax treatment of your PLOP distribution depends entirely on how you receive it.

Direct cash payout triggers mandatory 20% federal income tax withholding. STRS Ohio sends 80% of the PLOP amount to you and 20% to the IRS. A distribution made before age 59½ is generally subject to the 10% additional tax unless an exception applies; the separation-from-service exception covers qualifying plan distributions made in or after the year you turn 55. Ohio income tax applies to the taxable portion of direct cash payouts for Ohio residents.

Direct pretax rollover to a traditional IRA, 403(b), 457(b), or other eligible retirement plan avoids all immediate taxation. STRS Ohio transfers the full PLOP amount directly to the receiving institution. No withholding, no penalty, no current-year tax hit. The money remains tax-deferred until you withdraw it from the rollover account.

60-day indirect rollover is the middle path that catches people. You receive the full PLOP check (minus the mandatory 20% federal withholding), and you have 60 days to deposit the gross amount — including the 20% that was withheld — into an IRA or qualified plan. To roll over 100%, you must replace the withheld 20% from your own pocket. If you only roll over the 80% you received, the missing 20% is treated as a taxable distribution, subject to income tax and potential penalties.

The direct pretax rollover is the cleanest option for members who do not need the PLOP cash immediately. It preserves the full amount and defers all taxes until you draw from the rollover account on your own schedule.

The 1099-R Form

STRS Ohio makes Form 1099-R available online in January and mails it in late January to members who receive paper copies. It reports your total pension distributions and taxes withheld for the prior calendar year. If you took a PLOP, you receive a separate 1099-R for that distribution. These forms are what your tax preparer needs to file your return.

Check the 1099-R carefully against your own records. The distribution codes in Box 7 tell the IRS whether your distribution qualifies for rollover treatment, early withdrawal penalty exceptions, or other tax provisions. Code 1 means early distribution (potentially subject to the 10% penalty); Code 2 means early distribution with an exception; Code 7 means normal distribution (age 59½ or older).

Rolling PLOP into Ohio Deferred Compensation

Ohio's Deferred Compensation 457(b) Plan accepts PLOP rollovers. Withdrawals from a governmental 457(b) plan generally are not subject to the 10% early withdrawal tax, but that exception does not apply to distributions attributable to amounts rolled into the 457(b) from a qualified retirement plan. A PLOP rollover from STRS Ohio therefore remains subject to the additional tax if withdrawn before age 59½, unless another exception applies.

The STRS Ohio Retirement Guide includes a tax planning worksheet that maps out the federal and state tax implications of each PLOP distribution method, with breakeven calculations to help you decide between taking cash now and rolling over for later.

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