Hawaii Tax

[aldpal]

Someone expert in Hawaii Tax please help.........

RMDs are partially taxed by Hawaii if the employee contributed to the pension plan.

My question is how to determine the taxable portion from RMD in Hawaii.  Thank you in advance.

[ThomasM125]

You need to divide the total of your non-deductible contributions by the total value of your IRA. That will give you a percentage. Subtract that decimal percentage from 1 and multiple the result by your RMD and that will give you the taxable amount. For instance, if your non-deductible contributions are $5,000 and the value of your IRA is $20,000, then 25% of your IRA is non-deductible contributions. Subtract .25 from 1 and you get .75, or 75%. If you withdrew $1,000 from your IRA, then $750 of it would be taxable ($1,000 times 75%.)

[aldpal]

Thanks for responding, Thomas.  Am a little confused.  What do you mean with "non-deductible contributions"? Please elaborate.  Thank you so much.

[DaveF1006]

It depends on if your contributions were made with pre-taxed or after tax dollars. A contribution made with after tax dollars is a non-deductible contribution.  If there is an amount listed in Box 5 of the 1099R, this is an amount you made with after tax dollars and you will use this amount in Step 10 to figure out the taxable portion of your distribution

Keep in mind, you do not need to make calculations on your own as the program will do this for you. ThomasM125 thoroughly explained how the taxable amount of the annuity is determined and how Turbo Tax makes the calculation.

1. Open or continue your return.
2. In the Federal section, select Wages & Income.
3. Scroll to locate Retirement Plans and Social Security.
4. Select Start or Revisit next to IRA, 401(k), Pension Plan Withdrawals (1099-R)
5. Begin entering the 1099 R information.
6. When you fill this out, leave Box 2A blank and check the box that says taxable amount not determined,
7. After the 1099R is entered, there will be a series of questions you will answer including the state where you live.
8. Enter that this is a qualified plan unless it's a military pension or the other exceptions that are listed.
9. After answering a few more questions, there will be a screen that says Let's Figure How much is Taxable. here you will say that you need to figure out how much is taxable.
10. Next screen will have you put in a breakdown on the annuity start date, plan cost, number of months you received payment, etc. The plan cost are contributions you made with after tax dollars. This is usually reported in Box 5 of your 1099R.  
11. Next screen is where you will report your age.

Note: If Box 5 of the 1099R does not have an amount or if you are not sure if you made non-deductible contributions in the past, then the full distribution is taxable. If you are uncertain, you might wish to call the plan administrator to ask if non-deductible contributions were made by you and what are the totals.