Why is tax liability $1500 higher on a cashed out IRA belonging to husband than if it belonged to me?

[tnnnn]

I fixed it! I went back to where I entered my IRA basis info (post-tax contributions to my own personal IRA last year) and realized I had the box checked that my husband also contributed to an IRA last year, which he didn't. So I unchecked that box and the taxes owed went down!

[fanfare · Accepted solution]

Taxable amount is reduced and shown as described when you (the spouse) have a prior years basis in your IRA but your husband does not.

[Zbucklyo]

This might be it

[tnnnn]

Ahhhh. So in 2017 I did take an early distribution from my IRA, it was much much less than the one my husband took in 2018 (2017 was due to a period of unemployment, 2018 was for a down payment on a house). We were married filing jointly in 2017 as well. Why does that impact the taxable income in the following year for a married couple?

[fanfare]

i said prior years basis, not prior years distribution. I guess you don't have a basis in your IRA. Do you ?

[tnnnn]

I don’t think so, but I’m not sure I understand what a basis is.

[Zbucklyo]

A basis is an after-tax contribution to the IRA.  If you didn't make such a contribution, unfortunately @fanfare isn't explaining it.

[fanfare]

if you have a basis, or TurboTax mistakenly thinks you have a basis, your tax would be reduced.
Enter the distribution under your name, then check the forms in your return to see if Form 8606 is included. Form 8606 does the calculation.

[fanfare]

If you have a basis, TurboTax would also ask you for the year end value of your IRA.
There is probably something else going on here.

[fanfare]

if you are taking the $10,000 penalty exemption for a home purchase, perhaps it is not being applied when you switch owners from  the  the first owner entered to the other spouse

[tnnnn]

I did contribute to a personal IRA in 2018, so I do have form 8606. Now I can see where the # difference comes from between the two - the discrepancy between taxable income is equal to the amount I contributed in 2018 to my personal IRA. Now my question is why - why does my IRA contribution decrease our taxable income in one situation but not the other?

[tnnnn]

Just to be clear I DO have a basis in my IRA for 2018. My husband does not have a basis in his IRA for 2018, but he took a withdrawal from one of his IRAs.

[fanfare]

TurboTax should also ask you for the year end value of your IRA. Did that happen too. ?
When the IRA distribution is showing in your name print the 8606 and examine for correctness.
I don't see how it could be correct.