Is a federal retirement annuity taxable for federal income tax purposes?
There is a tax-free portion that represents a return of your contributions to the retirement plan. These contributions were previously taxed for federal and state income tax purposes and will not be taxed when received as part of your monthly annuity.

The rest is taxable and represents the federal government’s contribution to the retirement plan as well as any earnings in the plan. For annuities beginning since November 19, 1996, the tax-free portion of each monthly payment is based on your contributions and a factor based on your age and a survivor’s age if a survivor annuity option has been chosen. The younger you are at the time of retirement and the younger the designated survivor, the higher the number divided into the cost in the plan. This means that there will be a smaller tax-free portion of the monthly payment.
For annuities beginning before that date, there is a different, more complex formula to calculate the taxable and tax-free portions.