Received a 1099-R with Box 7, Code U and turned 59 1/2 in December 2020. How do I know if this is eligible for the NY Pension Exclusion?

[marksj2020]

Turbo Tax is claiming the 20,000 Pension Exclusion when I enter this.  But I'm unsure how to tell if the ESOP plan qualifies.  It is not a government plan.

[ThomasM125]

The payment would have to be from a New York State and Local Retirement System, New York State and City Education, or NYC Variable Supplemental Funds plan to be excluded from tax on your New York income tax return.

You will see this screen in TurboTax where you designate the plan as belong to one of the above, and that is how it would show as being exempt on your tax return. You can review your form 1099-R entries and click on the See Examples options to learn more about each type of distribution

[marksj2020]

What about Line 29- Pension and Annuity income exclusion - Amounts not from a NYS or local government pension plan or federal government pension plan? How would I know if it qualifies for that?

[DawnC]

It probably qualifies; see the last bullet point.  Government plans get full exclusion and most other qualified plans get the 20K exclusion per taxpayer.    For the state of NY tax returns:  If you were age 59½ or older for the entire tax year, you may exclude up to $20,000 of your qualified pension and annuity income from your federal adjusted gross income for purposes of determining your New York adjusted gross income. If you became age 59½ during the tax year, the exclusion is allowed only for the amount of pension and annuity income received on or after you became 59½, but not more than $20,000. Qualified pension and annuity income include:

• periodic payments for services you performed as an employee before you retired;

• periodic and lump-sum payments from an IRA attributable to compensation for personal services, but not payments derived from contributions made after you retired that are not attributable to compensation for personal services;

• periodic distributions from an annuity contract (IRC section 403(b)) purchased by an employer for an employee, and the employer is a corporation, community chest fund, foundation, or public school;

• periodic payments from an HR-10 (Keogh) plan, but not payments derived from contributions made after you retired;

• lump-sum payments from an HR-10 (Keogh) plan, but only if federal Form 4972, Tax on Lump-Sum Distributions, is not used. Do not include that part of your payment that was derived from contributions made after you retired;

• periodic distributions from deferred compensation plans sponsored by state and local governments and tax-exempt organizations (under IRC section 457); and

• periodic distributions of benefits from a cafeteria plan (IRC section 125) or a qualified cash or deferred profit-sharing or stock bonus plan (IRC section 401(k)), but not distributions derived from contributions made after you retired. 

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.