We're a couple over age 59½. My husband withdrew money from his IRA in 2019 and didn't get any tax break. When we questioned our tax person, she said the tax break didn't start until 2020.
This sounds like a misunderstanding.
Your tax person may be referring to a 2020 federal law that waived 2020 required minimum distributions (known as RMDs). You may have been asking about the law I wrote about in a recent column — a New York law enacted in 1981. That law waives state tax on $20,000 of annual retirement income for New York residents over age 59½. Depending on his age in 2019, your husband may not have been eligible for that exemption.
You wrote that New York doesn't tax $20,000 of income from tax-deferred accounts. However, the state's literature says this exclusion only applies to income from public employees’ retirement and pension plans. Is it also available for retirement income from nongovernment plans?
You've described two New York laws.
The law I wrote about exempts up to $20,000 of retirement income received by any state resident after age 59½. A different law grants an unlimited tax exemption on residents' income from government pensions and retirement plans.
Let's say John and Judy are married, filing jointly. She has $15,000 of income from her IRA and $35,000 from the New York State Teachers' Retirement System. Thanks to the two laws cited above, the entire $50,000 is exempt from state tax.
John worked for private companies. He can only deduct up to $20,000 of his retirement income, under the law available to all state residents. (No, Judy isn't allowed to pass John the unused $5,000 of her $20,000 exemption.)
The bottom line
New York State offers more than one tax break to retirees.
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