If you inherited an IRA after 2020 and the person you inherited it from wasn’t taking their required minimum distributions (RMDs), you don’t have to take anything out until ten years after the person died. But if the decedent was already withdrawing their RDMs, then you have to use the new 2022 table to calculate the amount you need to take out every single year until the ten years are up from the date of death. Confused? We totally understand. Don’t get lost in the mathematical mess. Richard and Angela are here to help. Schedule a free consultation today!

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LEARN MORE ABOUT: IRA Accounts

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REVEALED: Best Gold Backed IRA

If you inherited an IRA after 2020, this year-end planning season is especially critical to understand new IRS rules that dictate when you have to take required minimum distributions (RMDs). The changes, which take effect in 2022, can have significant implications for your taxes and retirement planning.

Under the old rules, beneficiaries of inherited IRAs were typically required to take RMDs over their lifetimes. However, the SECURE Act, passed in 2019, changed that. Now, most beneficiaries must take all distributions from an inherited IRA within 10 years of the original owner’s death.

This change has implications for your taxes since distributions from traditional IRAs are generally taxable as ordinary income. By taking all required distributions within 10 years, you could be forced to take larger distributions in some years, which could push you into a higher tax bracket.

However, there are some exceptions. If you are the surviving spouse of the original owner, you can still take distributions over your lifetime. Additionally, if the original owner died before their required beginning date (April 1 of the year following the year they turn 72), you may be able to take distributions over a longer period.

To avoid any surprises in your tax bill, it’s important to understand the rules and plan accordingly. Here are some steps to consider:

– Identify any inherited IRAs and understand the distribution requirements.
– Consider your income tax brackets and whether it makes sense to spread out distributions over 10 years or take larger distributions in earlier years.
– Consult with a financial advisor and tax professional to develop a plan that helps minimize your tax bill while meeting the distribution requirements.

By understanding these new rules and taking action before the end of the year, you can help ensure a smooth transition of your inherited IRA and minimize any potential tax implications.