Public Service Retirement Tax Relief Act of 2026

This bill proposes to amend the Internal Revenue Code of 1986 by creating a new special rule for individuals receiving certain pensions, effective for taxable years beginning after December 31, 2025. The core purpose is to establish a cap on federal income taxes for income derived from pensions provided by a State or local government. Specifically, the total tax liability for such individuals would be limited to the sum of their tax on non-pension income (the "non-pension tax amount") plus a fixed dollar amount. This fixed cap is set at $10,000 for individuals and $20,000 for couples filing a "qualified joint return," where both spouses receive State or local government pension income. The legislation aims to provide targeted tax relief to public service retirees by limiting the federal income tax burden on their government pensions.