Author Topic: Taxes on interited IRA withdrawals...clueless here!  (Read 905 times)

IslandFiGirl

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Taxes on interited IRA withdrawals...clueless here!
« on: June 18, 2020, 04:20:05 PM »
I feel like I know the answer to this question...but how are inherited (traditional) IRA withdrawals taxed?  Are they taxed like ordinary income?  I'm trying to decide if I should use some of that money for a large purchase this year but I don't want a big chunk taken out for taxes.  Can anyone point me in the right direction to figure things out?  (The amount of money is between 30-50K and could be taken out of savings or the inherited IRA, just not sure which way is most beneficial.)  Thanks for your help in advance!

HipGnosis

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secondcor521

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Re: Taxes on interited IRA withdrawals...clueless here!
« Reply #2 on: June 18, 2020, 05:20:47 PM »
Yes, it will be taxed as ordinary income.  If you look at a 2019 Form 1040, the amount you withdraw will show up on line 4b.

Also, if the person from which you inherited the IRA died after 12/31/19 and they were not your spouse, then you have until 12/31/2030 to withdraw all of the inherited IRA.  If either of those are not true, then there may be other options.

K_in_the_kitchen

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Re: Taxes on interited IRA withdrawals...clueless here!
« Reply #3 on: June 18, 2020, 06:07:22 PM »
Yes, it will be taxed as ordinary income.  If you look at a 2019 Form 1040, the amount you withdraw will show up on line 4b.

Also, if the person from which you inherited the IRA died after 12/31/19 and they were not your spouse, then you have until 12/31/2030 to withdraw all of the inherited IRA.  If either of those are not true, then there may be other options.

Also, if they died before 12/31/19 and are not your spouse, and they were over 70.5 and taking required minimum distributions, you have until 12/31 of the year you inherit to set up required minimum distributions.  I don't know if you have to do it if the person who died wasn't taking RMDs.  FIL died in 2018.  Before they could distribute the funds to the beneficiaries, the RMD had to come out and went to the trust. In 2019 DH started having to take RMDs (based on a new calculation taking DH's life expectancy into account).  For 2020, we took the option to suspend the RMD based on the CARES Act.
« Last Edit: June 18, 2020, 06:10:54 PM by K_in_SoCal »

terran

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Re: Taxes on interited IRA withdrawals...clueless here!
« Reply #4 on: June 19, 2020, 01:30:15 PM »
And if they died in 2020 then there are no longer RMDs, but the IRA needs to be completely distributed within 10 years.

 

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