Calculating RMDs for traditional IRAs inherited after 2019

[thaiguyinla]

Now a year plus later, can anyone with knowledge chime in on where the IRS has ended up on the issue of RMDs for non-spouse inherited IRA as pertaining to the 2023 tax year and beyond?

Specifically, for those like the OP and myself who have non-spouse inherited IRAs under the newer 10-year required draw-down period?

My deceased father was old enough to have begun taking RMDs on his IRA up until his death in 2020, where he took his final RMD. But for the 21 and 22 tax years,  I didn't do any formal RMDs for that account that I inherited because of the IRA's pending guidance.

But I did for the past two years start doing my own informal 10-year plan of distributions/withdrawals each year in order to avoid the balloon tax debt problem at the end of my 10 year drawdown period.

TurboTax is asking me this year how much of my 2023 distribution was an RMD -- all, none or part. I'm sure I withdrew more in 2023 than whatever formula RMD applies. But I don't know how to calculate what my actual RMD would be, and whether it's based on MY age when I inherited the IRA, or what my father's age is/was???

[dmertz]

For beneficiaries required under the proposed regulations to take RMDs under the 10-year rule, the IRS has similarly waived the penalty for not taking the RMD in 2023.

[thaiguyinla]

Wow! That's good news... So why then is TT bugging me about how much of my 2023 inherited IRA distribution was an RMD vs how much wasn't???

[dmertz · Accepted solution]

TurboTax is actually asking how much of the distribution is ineligible for rollover.  Because a distribution paid to a non-spouse beneficiary is never eligible for rollover, the correct answer it that it is all RMD.  However, TurboTax already treats a distribution paid to a non-spouse beneficiary as being ineligible for rollover, so the answer you provide to this unnecessary question is irrelevant (even in years where the penalty for not taking the RMD is not waived).

[thaiguyinla]

And how about this part pertaining to inherited non-spouse IRAs on the 10-year drawdown plan:

"But I don't know how to calculate what my actual RMD would be [ for future years where there might actually be a penalty for failing to do the required RMD], and whether it's based on MY age when I inherited the IRA, or what my father's age is/was???"

[dmertz]

Assuming that your father was the original owner of the traditional IRA making you the original designated beneficiary, your RMDs are calculated by dividing the previous year end value in the inherited IRA by your life expectancy factor.  Your life expectancy factor is your life expectancy from the Single Life Expectancy table for your age in the year following the year your father died, reduced by 1 each subsequent year.  The table is in Appendix B of the 2022 or later version of IRS Pub 590-B.  (Don't use the table from earlier versions of that publication.  The IRS updated the life-expectancy the tables.)

https://www.irs.gov/pub/irs-pdf/p590b.pdf

Because the account must be fully depleted by the end of year 2030 in this case, you might want to take distributions that are larger than the RMD to spread the taxable income out more evenly over the years.

[thaiguyinla]

Correct re your question, yes, my father was the original IRA owner and thus I as his beneficiary/inheritor am the original owner of what's become my inherited IRA.

Just to clarify re your comment above -- "RMDs are calculated by dividing the previous year end value"

Previous year end value meaning for the year that he died? Or previous year end value for whenever I'm doing the annual RMD calculation now, and in future years?

[thaiguyinla]

PS - Thanks so much for all the very helpful / useful info above!  😊

[dmertz]

For a 2024 RMD, divide the 2023 year-end value by the factor.