The Retired Public Safety Officer (RPSO) Tax Exclusion is a tax benefit that allows an eligible retired public safety officer to exclude up to $3,000 of qualified health or long-term care insurance premiums from taxable income when paid directly from a governmental retirement plan. According to the IRS, this exclusion applies only when distributions are made directly to an insurance provider for eligible coverage, ensuring the amounts are not included in gross income.
This provision is commonly associated with the HEART Act (often referred to as the HELPS Act), which expanded access to the benefit for qualifying retirees in public safety roles. In this article, we’ll explain who qualifies for the exclusion, what types of plans and premiums are eligible, and how to properly report it on a tax return.
Who qualifies for the Retired Public Safety Officer Exclusion?
When working with retired clients, this exclusion is just one of several important tax considerations, especially for those receiving pensions or other retirement income from public service roles.
The Retired Public Safety Officer (RPSO) exclusion applies to individuals who served in qualifying roles, including retired law enforcement officers, firefighters (including certain volunteer firefighters, depending on plan eligibility), chaplains, members of rescue squads, and ambulance crew members. If eligible, these individuals may exclude certain distributions, often from pensions or other qualified retirement plans, from taxable income when used to pay for insurance coverage.
Qualifying distributions must come from an eligible retirement plan, such as a qualified trust, a Section 403(a) plan, a Section 403(b) annuity, or a Section 457(b) plan, and must be used to pay premiums for accident, health, or long-term care insurance.
To be eligible, the taxpayer must meet several requirements:
- Retired due to disability or upon reaching normal retirement age
- Insurance premiums must cover the taxpayer, their spouse, or their dependents
- Distribution must come directly from the public safety employer’s plan (often a pension)
- Payment must be made directly from the plan to the insurance provider.
- The excluded amount is limited to the lesser of the premiums paid or $3,000 annually
- The election can only be applied to amounts that would otherwise be taxable income.
What expenses are qualified for the Retired Public Safety Officer Exclusion?
To apply the Retired Public Safety Officer (RPSO) exclusion correctly, it’s important to understand which expenses qualify. The exclusion is specifically limited to insurance premiums that are paid using distributions from an eligible retirement plan, most commonly a pension tied to public safety employment.
Qualified expenses include premiums for:
- Health insurance (including major medical and Medicare Advantage plans)
- Accident insurance
- Long-term care insurance
These premiums are eligible because the tax code allows certain retirement distributions, when used for healthcare-related coverage, to be excluded from taxable income. However, the key requirement is how the payment is made: the distribution must be directly transferred from the retirement plan to the insurance provider. If the retiree receives the funds and pays the premium themselves, the exclusion does not apply.
For tax preparers, this means verifying both the type of insurance coverage and the payment method when determining eligibility. When structured correctly, these qualified expenses allow retired public safety officers to reduce taxable income while covering essential healthcare costs in retirement.
How to report the Retired Public Safety Officer Exclusion
Reporting the Retired Public Safety Officer (RPSO) exclusion is less about specific software steps and more about ensuring the distribution and excluded amount are reflected correctly on the taxpayer’s return.
Eligible distributions are reported on Form 1099-R, which reflects the total amount paid from a retirement plan, typically a pension. The portion used to pay qualified insurance premiums (up to $3,000) can be excluded from taxable income, provided all requirements are met.
For current tax years, including 2026:
- Total pension or annuity distributions are reported on Form 1040, Line 5a
- Taxable amounts (after applying the exclusion) are reported on Line 5b
The excluded amount is typically identified in Box 5 of Form 1099-R, which shows insurance premiums paid. However, tax preparers should always verify that:
- The premium payments meet RPSO eligibility requirements
- The distribution was made directly to the insurance provider
- The excluded amount does not exceed the $3,000 annual limit
Because reporting can vary slightly depending on how the Form 1099-R is issued, it’s important to review the form carefully and ensure the taxable portion is reduced appropriately on the return.
