New York tax question for distribution on inherited IRA

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comehither2k18
Posts: 21
Joined: Fri Dec 29, 2017 8:23 pm

New York tax question for distribution on inherited IRA

Post by comehither2k18 » Thu Feb 13, 2020 2:56 pm

I was doing my taxes using freetaxUSA and on the NY section I came across the question about" NY Subtractions from Income" which asked Did *wife* receive a decedent's IRA distribution in 2019.

In 2017 my wife was one of the beneficiaries(25%) of her late mothers(mother was over 60 when died) traditional IRA. Mother-in-law total IRA was around $100k so wife ended up with $25k. She set up an Inherited Beneficiary Ira accout(I think that's what it's called). In 2019 she took out $14k from this account which she received a 1099R and reported that amount on fed tax section which is counted as income. The NY state section now asked this question and it's an approximate $500 difference in NY refund depending on the answer.

Anyone have any insight.?

JGoneRiding
Posts: 1880
Joined: Tue Jul 15, 2014 3:26 pm

Re: New York tax question for distribution on inherited IRA

Post by JGoneRiding » Thu Feb 13, 2020 3:13 pm

No direct NY experience but my guess is they do not tax IRA income if it is yours but do if it is inherited. Which does make sense.

MarkNYC
Posts: 1669
Joined: Mon May 05, 2008 7:58 pm

Re: New York tax question for distribution on inherited IRA

Post by MarkNYC » Thu Feb 13, 2020 6:00 pm

NY allows a $20K annual pension/IRA exclusion for taxpayers over age 59 1/2. If IRA income is received as a beneficiary, the exclusion is allowed regardless of age if the deceased IRA owner would have been entitled to it. There is a box to check on page one of the NY tax return to indicate the IRA income is for a beneficiary. If there is more than one beneficiary, the aggregate annual exclusion is $20K for all beneficiaries. Supporting documentation should be retained since NY has been known to request it.

retire2022
Posts: 1089
Joined: Tue Oct 02, 2018 6:10 pm
Location: NYC

Re: New York tax question for distribution on inherited IRA

Post by retire2022 » Thu Feb 13, 2020 7:55 pm

OP

I concur with MarkNYC, hey there fellow big appler!

from pages 14-16 (pdf page 15)

https://www.tax.ny.gov/pdf/publications ... /pub36.pdf

"Publication 36 (3/15)The exclusion also applies to pension and annuity income received by an estate or trust if the income meets the requirements as described above.

Qualified pension and annuity income does not include:

• Distributions received from a nongovernment pension plan as a nonemployee spouse in accordance with a court-issued qualified domestic relations order (QDRO) or in accordance with a domestic relations order (DRO) issued by a New York court.

• Distributions received as a result of an annuity contract purchased with your own funds from an insurance company or other financial institution. The payments are attributable to premium payments made by you, from your own funds, and are not attributable to personal services performed. Married taxpayers who both receive pension income are each entitled to a maximum pension and annuity income exclusion of $20,000 whether they file jointly or separately.

However, you cannot claim any unused portion of your spouse’s exclusion. If you receive your own pension income and your deceased spouse’s pension income, you are entitled to a maximum pension and annuity exclusion of $20,000 each year.

If you receive pension and annuity income of a deceased individual, you may take this subtraction (to the extent the distributions are included in your federal adjusted gross income), regardless of your age, if the deceased would have been entitled to it had the deceased continued to live.

If the deceased individual would have become 59½ during the tax year, you may subtract from your federal adjusted gross income the amount of pension and annuity income received on or after the date that the deceased individual would have become 59½, but not more than $20,000. In addition, the amount of pension and annuity income exclusion attributable to the deceased individual that you are eligible to claim as a beneficiary for the tax year must first be reduced by the amount subtracted on the deceased individual’s New York State income tax return, if any, for the same tax year.

If the deceased individual has more than one beneficiary, the $20,000 maximum amount of the pension and annuity exclusion must be allocated among the beneficiaries. Each beneficiary’s share of the $20,000 exclusion is determined by multiplying $20,000 by a fraction whose numerator is the value of the pensions and annuities inherited by the beneficiary, and whose denominator is the total value inherited by all beneficiaries of the deceased individual’s pensions and annuities. The total exclusion of the deceased individual and all beneficiaries cannot exceed $20,000 annually..........."

more on pdf

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