$20,000 exclusion for IRA distributions in New York State

[geogoetz]

I'm unclear if the $20000 exclusion for New York State tax applies to regular IRA distributions.

I'm 62 and would gladly take $20000 annual distributions from my regular IRAs if I can avoid  the New York State income tax on that amount or less.

Please advise.

Thanks,

George

[Bsch4477]

See page 13. 

https://www.tax.ny.gov/pdf/publications/income/pub36.pdf

[geogoetz]

Thanks but I've read this pdf and I cannot confirm if this $20000 exclusion also applies to a private or personal IRA account or an IRA rollover account.

[Bsch4477]

I understand. Call the NY taxing agency and ask them. 

[geogoetz]

I will, thanks. 

If it's doable it might make sense to start taking distributions now to reduce the future state taxes on the RMD.

[Opus 17]

Yes, in general, regular IRA distributions are subject to the $20,000 exclusion.  There are really only two kinds of "compensation" that would be allowable under federal law for making IRA contributions that are not allowable for the New York exclusion; educational fellowships and alimony.  If, somehow, a portion of your IRA was funded by alimony payments or an education fellowship after your retirement, your exclusion will be pro-rated.  (For example, if 10% of your IRA was funded after you retired using money paid to you by an ex-spouse as alimony, then even if you withdrew only $20,000, 10% of the distribution would be ineligible for the exclusion and would be taxed.)  These will be uncommon situations for most people.

Remember that even if the IRA distribution is excludable in NY, it will still be taxable at the federal (IRS) level, depending on your other facts and circumstances. 

• 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

• For "compensation" that is not compensation for personal services, see IRS publication 590-a.