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How does filing Form 8915-Disaster Distributions impact my state taxes?

SOLVEDby TurboTax1932Updated 3 weeks ago

IRS Form 8915 reports distributions from retirement plans due to qualified disasters and repayments. It lets you spread the taxable portion of these distributions over three years and waives the early withdrawal penalty in the year of the disaster.

The Secure Act 2.0 of 2022, provides up to $22,000 (per taxpayer) of such relief for taxpayers adversely affected by a 2021 or later “qualified disaster “. A qualified disaster is one that the president declares as a major disaster (a federally declared disaster).  These federally declared disasters are listed annually on FEMAs website and their FEMA number will contain the capital letters “DR”. Note: You will need this FEMA number to report on the Form 8915.

This form is also used to report the deferred taxable amount of qualified 8915-disaster distributions from previous years. Tax year 2023 is the third and final year that distributions related to the 2019 Puerto Rico earthquake and 2020 non-COVID related disasters are taxable on your federal return. 

Most states tax disaster distributions similar to the IRS. States may also have deductions from income for certain types of distributions, such as railroad retirement or other government pensions. For amounts taxable in 2023, TurboTax may ask you whether the deferred amount is one of these state deductible distribution types. 

For more info on how to calculate the taxable amount of your retirement distribution, see the IRS Form 8915

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