Pension and Annuity Subtraction Rule Question

Forum|Forum|1 year ago
February 21, 2025
1 reply
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I am VERY confused!!

Does the Pension & Annuity Subtraction Rule on IT-201 line 29 apply to INHERITED Traditional NON-spousal IRAs?

Scenario: Inherited a Traditional IRA from a deceased parent who passed at 69 and the tax software said I may be eligible for a subtraction on my NY tax return. There are 2 beneficiaries and the max subtraction for one beneficiary is 20K.
1. can i take this subtraction in full if my distribution is under 10k?

2. Does this rule APPLY to IRAs?!

Im very confused and frustrated as IRA is not in the title of this rule yet the tax software is prompting me to answer questions regarding the rule.

DawnC

Employee

No, you can only subtract the amount that was taxable on your federal return, up to your share of the $20k maximum. And yes, it applies to IRAs.

If you received a decedent’s pension and annuity income, you may make this subtraction if the decedent would have been entitled to it, had the decedent continued to live, regardless of your age.

If any portion of this exclusion was subtracted on the decedent’s personal income tax return, you must first reduce the amount you are eligible to claim by the same amount subtracted on the decedent’s return. The total pension and annuity income exclusion claimed by the decedent and the decedent’s beneficiaries cannot exceed $20,000.

If there is more than one beneficiary:

the exclusion is prorated in the same ratio as the distribution, and
the total exclusion claimed by all beneficiaries may not exceed $20,000

See NY - Common Q & As

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t231Author

Thank you for the response @DawnC! I am still a bit confused. Lol

My taxable distribution from my inherited NON-spousal Traditional IRA was 8K. I am one of 2 beneficiaries. Can i subtract the entire 8K? I don’t believe a subtraction was ever taken on the decedents personal tax return because they had not taken any RMDs prior to passing.

DawnC

Employee

You can deduct the full $8K on your New York return as long as that $8K is taxable on your federal return. You can verify the amounts were taxable on your federal return by looking at your Form 1040. If the $8k is on line 4b (or 5b or 6b), it is taxable on federal return, and you can subtract that amount from NY.

Your and the other beneficiary's combined subtractions can't be more than 20K.

How to Preview Form 1040 in TurboTax Online.

Use Forms Mode if you are using the desktop software.

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