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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

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Tax on inherited IRA

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.

Q: I will inherit part of an IRA from my father who died earlier this year. How will this affect my taxes?

A: It primarily depends on when the IRA funds are transferred to you. If the distribution from the estate occurs before December 31, 2006, then part of the money will be taken out of the IRA and taxed each year. The calculation of minimum required distribution is fairly complicated and presents some options that may allow you to minimize the taxes due. This is a good reason to seek professional help with tax planning now before the end of the year. If the distribution occurs in 2007, then you may keep all of the funds in an IRA account and there are no tax consequences until you choose to withdraw the money from the IRA account. A distribution in 2007 is preferable because it allows you the widest range of tax treatment options.


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