Maryland Pension Exclusion Income and Rollover IRAben

Forum|Forum|2 years ago
March 6, 2024
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I had a workplace 401K. When I left that job, I had the 401K funds directly transferred to a rollover IRA at my brokerage. I kept this rollover IRA separate from all other IRAs and other accounts. When I withdraw this money (after age 65) will it be eligible for the Maryland pension exclusion calculation as a defined benefit plan? It is not really a traditional or a Roth IRA (or a Keogh or SEP plan or ineligible deferred compensation) which are also excluded. This seems to be a gray area in the rules. Many people are advised to remove money from their old workplace 401Ks because the prior company could go out of business or merge which could create problems accessing 401K benefits

PaulaM

Employee

Once a 401k is rolled over to an IRA, it loses its pension exclusion in Maryland. The rollover makes it a traditional IRA, regardless of its original source. See first link below for reference.

There is the Senior Tax Credit and Social Security benefits exclusion available for seniors in second link below.

See part C, from Comptroller of Maryland

Senior Citizens and Maryland Income Taxes

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annlauren

Paula , what about this bill 189?

Department of Legislative Services Maryland General Assembly 2022 Session FISCAL AND POLICY NOTE First Reader House Bill 189 Ways and Means (Delegate Brooks) Income Tax - Subtraction Modification - Retirement Income This bill expands the pension exclusion by allowing income from individual retirement accounts (IRAs) and annuities under Section 408 of the Internal Revenue Code (IRC) to be included within the State subtraction modification allowed for retirement income (pension exclusion) if the contributions to the IRA or annuity consist entirely of the tax-free rollover of distributions from an employee retirement system. The bill takes effect July 1, 2022, and applies to tax year 2022 and beyond.