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Ask the Expert: More about the $20G retirement income exclusion

My Aug. 8 column discussed the New York tax exclusion on up to $20,000 of yearly retirement income. Today's column corrects errors spotted by sharp-eyed readers and addresses a follow-up question.

You wrote that to claim the full $20,000 exclusion, you must have been at least 59½ for the entire year. That’s not correct. The New York State instruction booklet says you can claim an exclusion on an amount you received after you became 59½, but only up to $20,000.

You're right. That means if you became 59½ on Dec. 1 and took a $20,000 distribution on Dec. 2, you could claim the exclusion on that entire $20,000 distribution.

You wrote that the $20,000 retirement income exclusion is available to beneficiaries if the deceased account owner was at least 59½ when he died. But the instructions say it’s available if the decedent would qualify if he or she were still living.

You're right. The instructions say beneficiaries may be entitled to the exclusion "if the decedent would have been entitled to it, had the decedent continued to live."

This means that if you and siblings inherited Uncle Fred's individual retirement account two years ago, for example, and he’d have been 59½ on Sept. 30, 2021, you can share his $20,000 tax exclusion on distributions you take after Sept. 30, 2021.

If I'm over 59½ and I receive $50,000 in distributions from my IRAs, and also receive $30,000 from an IRA I inherited from someone who was over 59½, would my total exclusion be $40,000 — $20,000 for the distributions from my own IRAs, plus up to $20,000 for my distributions from the inherited IRA?

Nice try, but no. Your total tax exclusion on retirement account income from all sources cannot exceed $20,000.

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TO ASK THE EXPERT Send questions to Include your name, address and phone numbers. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own consultants for your specific needs.

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