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california state tax on ira distribution (no penalty)

Forum|Forum|2 years ago
October 10, 2023
2 replies
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We withdrew IRA money (both over 59.5 yrs) for educational expense and thought we didn't have to pay taxes - stupid me. Federal is handled by TT but CA State asks for a ridiculous calculation based on how much state is vs federal - which I paid neither. So how do I compute the correct CA state taxes? Thanks in advance.

Best answer by dmertz

The taxable amount of an IRA distribution is ordinary income, so there is no California calculation involved that is specific to the IRA distribution. The taxable amount is included in federal AGI is not reduced on your California tax return when computing the California income tax [Edit: unless you have California basis in nondeductible contributions made in 1987 or between 1982 and 1987 which you will need to have tracked to be able to claim; see VolvoGirl's post below and FTB Pub 1005]. Because you are over age 59½, the Form 1099-R will have code 7 indicating that there is no early-distribution penalty.

Income from an IRA is income in your state of residence. If you are a California resident, the IRA distribution is California income. If you are not a California resident, the IRA income is not California income.

A

Anonymous_

Employee

I'll page @dmertz to see if he has any input.

D

dmertzAnswer

Employee

The taxable amount of an IRA distribution is ordinary income, so there is no California calculation involved that is specific to the IRA distribution. The taxable amount is included in federal AGI is not reduced on your California tax return when computing the California income tax [Edit: unless you have California basis in nondeductible contributions made in 1987 or between 1982 and 1987 which you will need to have tracked to be able to claim; see VolvoGirl's post below and FTB Pub 1005]. Because you are over age 59½, the Form 1099-R will have code 7 indicating that there is no early-distribution penalty.

Income from an IRA is income in your state of residence. If you are a California resident, the IRA distribution is California income. If you are not a California resident, the IRA income is not California income.

T

TomD8

Employee

The only circumstance in which a calculation might be necessary would be if you moved into or out of California during the tax year and took an IRA distribution in both states. In that circumstance, you would have to allocate the total IRA distribution between the two states.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

VolvoGirl

Employee

A long time ago when IRA first came out California did not give you the same 2,000 deduction as federal. I think it was only 1500? So you had a 500 basis in CA. I can go look up my old returns. But I'm planning to not bother with it and just ignore it and pay the tax on the whole amount for CA.

I looked up my excel spreadsheets and found one for IRA that has my 1986 federal basis as 2,000 and CA as 1,500. 1987 is 2,000 for both.