Public Service Retirement Tax Relief Act of 2026

The Public Service Retirement Tax Relief Act of 2026 limits the federal income tax that individuals receiving state or local government pensions must pay. Starting in 2026, the total tax on these pensions cannot exceed $10,000 for single filers or $20,000 for married couples filing jointly. This cap is calculated by first determining the tax owed on all income except the pension, then adding the maximum allowable pension tax amount to that figure. The bill directly affects public servants who rely on pensions from state or local governments for their retirement income.