Inherited IRA

Submitted by Matthew Morea on Mon, 2020-12-21 20:46

Hello i just last month opened an inherited IRA from my decd fathers IRA. I am the only daughter. Is it true that i can take a death distribution up to $20K this year and not have to pay New York State tax on it? I know its taxed at the federal level..i also know RMDs are waived for 2020. Just wanted to get clear on the state taxation. My age is 35. Thanks



Submitted by Alan - IRA critic on Mon, 2020-12-21 22:42

  • Below am attaching a link to NYS Pub 36. On p 14 there is a paragraph for beneficiary exclusions, and you will see that you can exclude up to 20k in 2020 if your father would have been over 59.5 when you took your distribution, but you also have to reduce the 20k by any amount that his 2020 final return will exclude under the 20k subtraction of distributions he took after 59.5. If he was under 59.5, you will have to wait until he would have been over 59.5, and then check p 14 closely.
  • Publication 36:(3/15):General Information for Senior Citizens and Retired Persons (ny.gov)
  • Note that if he passed in 2020, the Secure Act applies. Unless you are disabled or chronically ill on his DOD, you fall under the 10 year rule, and there are NO RMDs due for any year until 2030, in which year you will have to drain the inherited IRA if there is a balance remaining. If the IRA is large, you may want to distribute a portion each year to prevent a large spike in 2030 that could increase your tax rate.
  • If he passed prior to 2020, you will have annual RMDs, and the p 14 of Pub 36 will have to be reviewed to determine your potential exclusion amount. Complicated.

Add new comment

Log in or register to post comments