I inherited a traditional IRA as beneficiary from my mother. She passed before taking the RMD, so it is being distributed now. I am 63, working full time, and live in NY State. I understand that this distribution will be taxable by the IRS, but would the state tax it also? If so, at what rate? Is there a way to roll it into an existing IRA of my own as this year's contribution?
Is there a way to roll it into an existing IRA of my own as this year's contribution?
NO, non spousal inherited IRA can never be rolled into an existing account ... it must always be titled as an inherited IRA.
https://www.thebalance.com/options-for-non-spouse-beneficiaries-of-inherited-iras-3505448
but would the state tax it also?
See page 14 for the NY rules :
You can use cash from the RMD to make a personal IRA contribution, but it is not a rollover. The IRA contribution is a new contribution. Of course you must be eligible to make the IRA contribution.
Several side notes:
If you choose to move the inherited IRA, it must be moved by nonreportable trustee-to-trustee transfer to another inherited IRA (with your mother as deceased owner, for your benefit). It cannot be moved by distribution and rollover.
If your mother died in 2016, just make sure that it is completed by the end of 2016 so that the RMD is not late. However, if your mother died before 2016 you must amend your tax return that you filed for the year of your mother's death by adding Form 5329 to request a waiver of the excess accumulation penalty, based on now having made the late RMD distribution.
Yes & no.
An inherited (non spousal) IRA is taxable by NY State. From the instructions for form IT-201: "The computation of your New York State (and New York City and Yonkers) income tax is based on information you reported on your federal income tax return, including your income and federal adjustments to income".
But, since you are over age 59-1/2 there is an up to $20,000 deduction allowed for qualified pension distributions, including inherited pensions. See the instructions for line 29 (page 18) at https://www.tax.ny.gov/pdf/current_forms/it/it201i.pdf
Since you are over 59 1/2, up to $20,000 would not be taxable in NY State, assuming you were the only beneficiary, otherwise the $20K has to be allocated among the beneficiaries. Since it is a beneficiary IRA, it can not be rolled over into a traditional IRA. I hope that helps.