How much tax is withheld from a pension?

What the rules cover

Publication 575 says retirement plan distributions are subject to federal income tax withholding, but you can choose not to have tax withheld on payments unless they are eligible rollover distributions. The rules apply to the taxable part of payments from an employer pension, annuity, profit-sharing or stock bonus plan, any other deferred compensation plan, a traditional IRA, or a commercial annuity, meaning an annuity, endowment or life insurance contract issued by an insurance company. The publication adds that there is no withholding on a part of a distribution that it is reasonable to believe will not be includible in gross income.

Periodic payments and Form W-4P

Periodic payments are amounts paid at regular intervals, such as weekly, monthly or yearly, for a period of more than one year, for example 15 years or for life. Unless you opt out, the payer treats them as wages for withholding. You give the payer a completed Form W-4P or a similar form the payer provides. If you do not, tax is withheld as if you were single with no adjustments in Steps 2 through 4 of Form W-4P, which is also what happens if you do not give the payer your Social Security number in the required manner or the IRS tells the payer the number is wrong.

To change the amount you file a new withholding certificate. The publication points to the Form W-4P instructions and Publication 505 for the mechanics. The amount that comes out is a function of your certificate and the payer’s tables, so there is no flat percentage to quote for periodic payments.

Other payments: 10% and Form W-4R

For a nonperiodic distribution that is not an eligible rollover distribution, the withholding rate is 10% of the distribution unless you choose no withholding. You can also ask the payer to withhold an additional amount using Form W-4R. The part of a plan loan treated as a distribution, other than a loan-offset amount, is subject to withholding under this rule. You make the no-withholding choice on Form W-4P for periodic payments or Form W-4R for nonperiodic payments, and it generally stays in effect until you revoke it.

Eligible rollover distributions: 20%

An eligible rollover distribution generally has 20% withheld, and you cannot choose otherwise. The way to avoid it is a direct rollover, where the plan administrator pays the money straight to another qualified plan or a traditional IRA, in which case no tax is withheld. If you take the check yourself and want to roll over the whole amount, you must add other money to replace what was withheld. In the publication’s example a $10,000 distribution has $2,000 withheld, you receive $8,000, and rolling over only $8,000 leaves $2,000 in your income, possibly with the 10% additional tax if you are under 59½.

When the payer must withhold anyway

The payer ignores your choice not to withhold if you do not give your Social Security number in the required manner or the IRS has told the payer the number you gave is incorrect. A U.S. citizen or resident alien must also give the payer a home address in the United States or its territories to choose no withholding; a nominee or trustee address is not enough. Without a U.S. home address, the choice is available only if you certify you are not a U.S. citizen, resident alien or section 877 expatriate, and then 30% nonresident alien withholding may apply unless a treaty reduces it.

Estimated tax if you opt out

If you choose no withholding, or too little is withheld, you may need to make estimated tax payments. The publication says you generally must pay estimated tax for 2026 if you expect to owe at least $1,000 after withholding and credits, and expect withholding and credits to be less than the smaller of 90% of the 2026 tax or 100% of the 2025 tax. The 100% becomes 110% if 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately for 2026). Part of Social Security or tier 1 railroad benefits may be taxable, and Form W-4V lets you have tax withheld from those.

Worked example

A retiree takes a one-time $20,000 payout that is not a rollover distribution and does not opt out: $2,000 (10%) is withheld. If the same $20,000 were an eligible rollover distribution paid to her, $4,000 (20%) would be withheld, leaving $16,000. A direct rollover of the same $20,000 would have no withholding. Withholding is only a prepayment: the actual tax is settled on the return, so the amount withheld can be too high or too low for your bracket. This page summarizes federal rules only; some states have their own withholding requirements.

Sources

• IRS Publication 575, Pension and Annuity Income (2025): Withholding Tax and Estimated Tax (periodic payments, nonperiodic distributions, eligible rollover distributions, estimated tax); Rollovers (partial rollovers example). Read November 2, 2026.

Edition read: Publication 575 (2025), for use in preparing 2025 returns. Dollar limits and dates in this publication are for 2025; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.