Income earned in the private sector while on federal disability retirement is taxable in addition to the annuity itself. Combining the two can push a retiree into a higher tax bracket than expected. Planning for the combined tax picture before starting private-sector work, rather than after, helps avoid surprises come tax season.
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Federal employees on Federal Disability Retirement who plan to work in the private sector sometimes don't think about how that additional income affects their tax situation. It's a gap that can lead to some real surprises when tax season rolls around.
If you're on Federal Disability Retirement and working in the private sector, that income is taxable on top of your annuity. The two things can push you into a higher tax bracket than you might expect. And your annuity itself is taxable as regular income.
Between those two income sources, it's worth understanding what your combined tax picture looks like before you start working, not after. A CPA or financial advisor with federal benefit experience can help you plan for it and avoid any unpleasant surprises.
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