What would make a pension "Not eligible for exclusion for those over age 59-1/2?

[markedward53]

I am filing in New York State and the pension is not from a state or city government.

[LenaH]

A pension is not eligible for exclusion if it is not a distribution received by officers and employees of the United States, New York State, or local governments within New York State. These types of pensions are fully exempt from New York State, New York City, and Yonkers income taxes. 

Any other type of pension may qualify for a pension and annuity exclusion of up to $20,000 in NYS, as long as your pension is taxable to New York, and you are over the age of 59 ½ or turn 59 ½ during the tax year. If married filing jointly, each spouse may deduct up to $20,000, which would total $40,000 per tax year. 

The adjustment to exclude $20,000 from your NYS pension is done under Wage and retirement adjustments. This is found on the NYS screen Changes to Federal Income. 

You can follow these steps in TurboTax to get to the correct NYS screen:

1. Open your return.
2. Click on State in the left hand column.
3. Click Edit next to your resident return.
4. Click Update or Start next to Adjustments to federal income on the screen You Just Finished Your New York Return.
5. Scroll down to Wage and retirement adjustments.
6. Click Start next to Received retirement income. 
7. Follow the on-screen instructions. 

For more information, please see Publication 36.

[markedward53]

I found the first sentence confusing; double (or triple) negative.  Which also makes it unclear which pensions the second sentence applies to.  For example the first paragraph could have one sentence that read:

"A pension which is a distribution received by officers and employees of the United States, New York State, or local governments within New York State are fully exempt from New York State, New York City, and Yonkers income taxes."

TurboTax could make the choices on their page simpler/clearer it seems, with simpler help info.

[LenaH]

Qualified pension distributions received by employees of the United States, New York State, and local governments within New York State are exempt from New York State income taxes. 

Any other type of pension may qualify for a pension and annuity exclusion of up to $20,000 in NYS, as long as your pension is taxable to New York, and you are over the age of 59 ½. 

If married filing jointly, each spouse may deduct up to $20,000, which would total $40,000 per tax year. 

@markedward53

[RPMBoss888]

If...

-A pension (traditional IRA) owner was 80 years old when they passed away in 2023

-The IRA funds were earned through employment by a private business; not federal, state, local funds

-That pension was divided equally between three beneficiaries

-I was one such beneficiary (at the age of 51), receiving less than $20,000 for my share

-I fully cashed out my portion of IRA in the same year

Then...

-When asked "Where is your distribution from?" in turbotax, do I mark "not eligible for exclusion for those over age 59 1/2" or "None of the above?"

[JotikaT2]

Since the distribution is from someone who passed away, you would select none of the above.  As you proceed through the interview section, you will also get to a screen titled "when was the original retirement plan owner born."  On this screen, you would enter the birth year of the traditional IRA owner to ensure the retirement funds are reported correctly.  Please see the image of the screen below.  This screen will appear if the distribution code in box 7 of your 1099-R is listed as code 4 for death.  I'm very sorry for your loss.

@RPMBoss888