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Dear Tax Talk,

If my spouse passes away, and I’m only 35 years old, would I have to pay an additional 10 percent above my regular income tax on the distribution from his IRA?

Is there any way to avoid it if:

  • I want to start withdrawing from the IRA now?
  • I want to combine that IRA with my existing IRAs? Would it count against my contribution limit for that tax year?

— Lena

Dear Lena,

As the beneficiary of your deceased husband’s IRA, you would not have to pay the additional 10 percent tax on the distributions you receive. Additionally, as a spouse, you would have several options to consider with this inherited IRA.

Options for the surviving spouse

  • You can designate yourself as the owner of the IRA. This means that you determine the required minimum distribution, or RMD, as if you were the owner beginning with the year you make this election. Because of your age, you are not yet required to take an RMD, and you can let the money continue to grow tax-free.
  • You can roll over the IRA to your own IRA and avoid any taxes until you are required to take your RMD. Doing a rollover would not count against your IRA contribution for the year.
  • You can continue to be the beneficiary of this IRA rather than treating it as your own. The RMDs are then calculated using Table III (Uniform Lifetime) in Appendix B of IRS Publication 590-B, Distributions from Individual Retirement Arrangements. However, if you are the sole beneficiary of this IRA and are 10 years younger than your spouse, your distributions are calculated using the life expectancy from Table II (Joint Life and Last Survivor Expectancy) in Appendix B.

Please do not hesitate to sit down with a tax professional who can help you sort out these decisions with respect to your particular tax situation.

Thank you for the great question and all the best to you as you move forward.

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