Is the Inherited IRA RMD Waived in 2024?
Key Takeaways:
– You are not required to take a minimum distribution from your inherited IRA in 2024.
– The IRS has extended the waiver for required minimum distributions for inherited IRAs through 2024.
– Different rules might apply if the person from whom you inherited the IRA was already taking their required minimum distributions (RMDs).
Links – Is the Inherited IRA RMD Waived in 2024?
Link to Beneficiary IRA, Inherited IRA, SECURE 2.0 Act video
Link to SECURE 2.0 Act in 4 minutes video
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Transcript – Is the Inherited IRA RMD Waived in 2024?
Do you have to take money out of your Inherited IRA RMD in 2024?
Keep watching to find out!
New information came out from IRS regarding beneficiary… or… inherited IRA RMD.
I know Tom has talked about it in the previous two episodes, so go back and check those out, if you want further details on the Secure 2.0 Act.
We’re going to specifically be talking about “non-spouse” beneficiary IRA’s.
Beneficiary IRA RMD and Inherited IRA RMD are the same thing. So I’m going to use them interchangeably here.
“Non-spouse” means, you know, mom dad, brother sister, cousin. Someone – other than a spouse – passed away and left you their retirement accounts. They left you their IRA.
Originally, “pre-SECURE Act,” there were rules in place that allowed you to stretch the distributions from that inherited IRA RMD out over your lifetime.
In 2019, with the first version of Secure Act this changed. They said that you had ten years to drain the account.
People interpreted that as “okay I don’t have to take anything until the tenth year. Then I can drain the account and and take out the balance.”
In the Secure Act 2.0, the IRS changed up their what they were saying and said, yes you still have ten years to take it out. But also, you have to take a required minimum distribution from the account EACH year.
Whoa, whoa, whoa!
This isn’t what we thought!
The IRS sent people scrambling, because they were worried, “well I didn’t take any money out, because I thought I could wait until the tenth year to do it. So am I gonna be penalized on that?”
The IRS didn’t really give enough time, or enough warning, for people to plan for these required distributions they were now saying people had to take.
The biggest issue here is tax preparation. Because IRA distributions are taxed as ordinary income.
If you’re required to take out an extra $10,000 or $20,000 or $30,000 each year — it depends on the size of the IRA how much you’d be required to take out — that could push people up into a higher tax bracket, giving them a higher tax bill.
Or it could mess up the plan they had in place to minimize taxes.
So it threw people for a loop. And there was enough pushback the IRS said “okay we hear you.”
For 2022, they said, we’re not going to penalize you if you don’t take any (Inherited IRA RMD) required minimum distribution for this year.
Okay. That was good.
In 2023, we were kind of waiting around to see what they were going to do — for almost a little more than half the year — we were in limbo.
We weren’t sure what they were going to do. They extended that through 2023, as well.
And here we are in the middle of April of 2024. And they’ve extended it yet again, for 2024.
So you are not required to take a required minimum distribution from your inherited IRA RMD this year in 2024.
We’ll see what guidance the IRS issues for 2025.
Hopefully they put a permanent set of guidelines in place, so we can start to plan for these distributions – and not be guessing, or worrying about what they’re going to do.
I also just want to throw in another nuance -— because there’s not enough already!
There are different types of beneficiaries. So if the person you inherited the IRA from was already taking their RMDs (so they were already in their seventies).
Different set of rules MIGHT apply to your situation!
So a “ton of moving parts” here!
I know it’s confusing. We’re doing our best here to communicate with you. And to communicate with our clients, in these situations.
Please consult a professional if you have questions. Either that’s your tax preparer, or an investment advisor, or let us know if you need clarification on what you should be doing with your inherited IRA.
I’m sure we’ll be talking about this topic MORE in the future!
But for now, thanks for tuning in to this episode of the Mullooly Asset show.
