Splitting first Required Minimum Distribution over two year period | Ed Slott and Company, LLC

Splitting first Required Minimum Distribution over two year period

I turned 70 1/2 years old in July of 2014. I know what my first year RMD is. I would like to take 80% of it in calandar year 2014 and 20% of it in January of 2015 before the April 1st 2015 deadline. (I also intend to take the full second year 2015 RMD in calandar year 2015.) My question is can I split the distribution as mentioned above not incur any penalty?

Reason for question: I live in NJ and if I can make the above split my NJ income for 2014 will be under $100,000. This will allow me to take a $20,000 IRA deduction from my state taxable income.

Thank you
Lou M.

Yes, you can split your first IRA RMD in any proportion between your first distribution year and your second. The first year RMD must be fully completed by 4/1 of the following year. This is a one time opportunity, so taxpayers should take advantage of it. In your case, it will save you money on your state taxes, in many other cases a certain split of the first RMD can save taxes on SS income which can be taxed at an effective rate of 1.85 times your nominal tax rate. In my case, the optimal portion for the first year RMD was 2/3 of the full amount. Note that if you take less than 100%, there is NO adjustment for the year end balance used to compute the second year RMD. The actual balance applies.


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