Why is Turbo Tax reporting my RMD as a taxable item for Alabama?

[fdk50]

There is not a way for me to exempt it like I did for the military retirement pay which is also not taxed in Alabama.

[DawnC]

Not all retirement income is exempt from tax in Alabama.   If your 1099-R is from one of the systems below, it is not taxable.  But for all other 401k and IRA distributions, the income is taxable on your Alabama return.  

Alabama income does not include:

• U.S. retirement system benefits.
• State of Alabama Teachers’ Retirement System benefits.
• State of Alabama Employees’ Retirement System benefits.
• State of Alabama Judicial Retirement System benefits.
• Military retirement pay.
• Tennessee Valley Authority Pension System benefits.
• U.S. Government Retirement Fund benefits.
• Payments from a “Defined Benefit Retirement Plan” in accordance with IRC section 414(j).
• Federal railroad retirement benefits.
• Federal Social Security benefits

If your RMD distribution was from one of the systems above, delete the 1099-R and carefully re-enter it.   There are follow-up questions after that need to be answered in order to get the income in the correct spot on your tax return.  If the income is from a plan above, you can exempt it on the Alabama return.  

[fdk50]

Hi Dawn,

Yes, I followed all of this for my military retirement pay. Alabama passed a law in 2023 that RMD's are tax exempt up to $6,000, and my question is why does Turbo Tax not reflect this in this section? As a result, there is no way for me to record it as not taxable like I did for the military retirement pay. I'm wondering if there is another way around it?

[DoninGA]

@fdk50 The law that was passed exempts the first $6,000 of retirement plan distributions for taxpayers age 65 or older 

Were you age 65 or older in 2023?

[fdk50]

Yes, I am 72.

[DoninGA]

So if you did not have one of the retirement plans listed the Alabama state program would have excluded the first $6,000 of the distribution reported on the Form 1099-R.  Or you would have been asked in the state program how much of the distribution should excluded.

Did the Alabama state program cover this type of exclusion?

[fdk50]

When you say Alabama State program, do you mean the Alabama State Turbo Tax return? If so, then no. It only transferred the RMD amount from my federal return.

[DoninGA]

Ok, then I need to turn this back over to the TurboTax expert who has the resources to do an investigation when using the TurboTax state software for Alabama @DawnC 

[fdk50]

Thanks. Because it seems to me that Turbo Tax did not update the program to cover this law enacted in 2023.

[phillips-66]

HB162 in Alabama in 2023 was a bill that exempted the first $6,000 of retirement plan distributions for taxpayers aged 65 or older. The bill HB162 was signed into law by Governor Kay Ivey on April 25, 2023. 

For more information do google search . what is unclear is the exemption $6000 total per  person or per IRA/401k account?

[AmyC]

The document signed, Governor Ivey Continues Providing Tax Relief, shows the first $6,000 per person is exempted. She also raised the standard deduction.

It is not per account, just one deduction of $6,000.