2025 Form 1040, Lines 5a & 5b
Pensions & Annuities: Lines 5a & 5b Explained
Pensions and annuities — 2025 Form 1040, Lines 5a & 5b — report gross pension and annuity payouts on Line 5a and the taxable portion on Line 5b. Fully taxable pensions match on both lines; after-tax cost is recovered tax-free under §72.
Gross on 5a, taxable on 5b
Form 1099-R Box 1 flows to Line 5a. When the pension is fully taxable — typical employer-funded pensions with no employee after-tax contributions — 5a and 5b are identical. When you paid in after-tax dollars, part of each payment is a tax-free return of your own cost, and only the remainder is taxed on 5b.
The Simplified Method under §72
Qualified-plan annuities commonly recover after-tax cost through the Simplified Method worksheet: a fixed tax-free slice of each monthly payment until the cost is used up, then fully taxable payments after that. Keep the worksheet with your return papers — the exclusion amount stays the same every year until cost recovery is complete.
Lump sums and rollovers
A lump-sum distribution still flows through Lines 5a and 5b from Form 1099-R — gross on 5a, taxable on 5b — unless it is timely rolled into another eligible plan. A direct rollover avoids both the tax and the mandatory withholding headache of an indirect one.
Questions, answered
- Why do Lines 5a and 5b sometimes match?
- When the pension is fully taxable — no after-tax cost to recover — gross on 5a and taxable on 5b are the same number.
- How is after-tax pension cost recovered?
- After-tax contributions come back tax-free over the annuity payments, often via the Simplified Method under §72, with only the rest taxed on Line 5b.
- Where does a lump-sum payout go?
- A lump sum still flows through Lines 5a and 5b from Form 1099-R — gross on 5a, taxable on 5b — unless it is timely rolled over into another eligible plan.
Keep reading: IRA Distributions · Social Security Benefits · Total Income